ATM - A2 Milk Corporation Limited

[NT001]

Thanks Zymwh, yes that does clarify things. Nothing there surprises me very much. However, I can't say Freedom (controlled by Perich) have done a lot to help the SP since the dual listing, especially by announcing their stake was available for sale. And it seemed surprising that Perich relinquished its seat on the a2MC board not long ago, leaving just the Freedom representative.

I'd be uneasy about a Chinese takeover, or a takeover by a messy combination of Aussies, Chinese and Americans, although if Chinese are involved my guess would be that current shareholders would hold out for a much higher price. It seems to me that there would be too many conflicting motivations involved insuch co-ownership. The company's current strategy is taking some time to achieve huge returns, but that's inevitable and wouldn't change much under new ownership. And at least the current strategy and objective is very clear, and management is united on what it's trying to do, continuing in the footsteps of the company's visionary founders. It's getting there, and I think most of us are pretty happy with recent progress.

All this raises some pretty interesting issues. Are we really going to have America's biggest milk processor (Deans) plus a couple of Chinese government-controlled dairy giants and the Perich-Freedom consortium all publicly supporting the proposition that standard milk is indigestible by a large percentage of consumers? Not to mention it also being medically hazardous to a significant percentage? After all, that's A2's selling point. And if a2MC's new owners who are donkey-deep in mainstream milk are not prepared to come out publicly and say this, you have to wonder if they might prefer to continue jeopardising the health of the world's milk consumers by burying the A2 message.

Interesting that there is speculation about Fonterra. I don't have NBR access so I don't know the details there, but I think any bid by them at the moment would be unlikely. Even just a 10% blocking stake would cost it close to $50m, which would raise a few eyebrows among its farmer clients at this time of fiscal pain.

Fonterra's public stance in recent years has consistently been to rubbish the A2 proposition, even though its science chief Jeremy Hill played a key part in developing it. So it would be a backdown if it decided, for whatever reason, to put money into it. And it could possibly expose Fonterra to legal risks down the line. However, according to Keith Woodford, Fonterra does have a plan in its back pocket with regard to A2, which it may use at an appropriate time. Hard to guess what that may be.

On a2MC's side, I think there would still be a desire to work with rather than against Fonterra despite their past animosities if the latter were willing, partly for the sake of the NZ and Australian dairy industries as a whole. A lot of Fonterra's more clued-up farmer suppliers have quietly moved their herds towards A2 through selective breeding already. And the media columns written by Keith Woodford who is highly regarded in the dairy industry and has been strongly encouraging conversion to A2, based on his knowledge of both the science of A2 and farm economics, will undoubtedly have been making many farmers question Fonterra's stance.

Interesting days ahead.

[JohnnyTheHorse]

I'm sure Perich would argue he is major holder in FF, ipso facto he has right to know what goes on at board level in A2 thus not inappropriate?

Ideally all shareholders should be treated at the same level wrt disclosure. I suspect a2 approached Freedom to see if they would support a capital raising. Acting on that information is where the major breach occurs. FMA will do nothing, but being ASX listed we may see some fun from that bunch.

[drcjp]

Ideally all shareholders should be treated at the same level wrt disclosure. I suspect a2 approached Freedom to see if they would support a capital raising. Acting on that information is where the major breach occurs. FMA will do nothing, but being ASX listed we may see some fun from that bunch.

Agree but I suspect Perich may have done business this way in the past and be quite comfortable about it still.

[silverblizzard888]

Well it just sounds like The Perich Family just don't like how things are being run because they aren't getting the riches that everyone here probably expected A2MC to generate for them given how unqiue the product is and so they aren't concerned about owning majority share of the company they are more just interested in taking it over just to change the strategy of the company for more rapid returns. They want Dean foods in position just as a strategic play since they don't have much cash to splash, but they have the distribution and processing to accelerate the hell out of the potential this company has. I think FF are setting themselves and Dean Foods as strategic players and then offering this plan to a cash rich Chinese company to bankroll the takeover. It seems like that in my mind but take it as you will, the puzzle seems to come together when I think of it this way.

[winner69]

There is so much scepticism on this forum(me included) and given the current share price from the general markets as well.
I think we are all guilty of not being able to see the wood through the trees and I think it is very easy to lose focus on the macro picture here.
ATM once again are benefiting from a **** load of free market exposure due this latest development especially in the US with much more to come.
Furthermore the simple fact that a major US dairy company is considering taking all or a piece of our mighty fine company is reason’s enough for the share price to be re rated so to be perfectly honest I don’t believe the current share price has any premium in it considering a take over could eventuate.
The current share price also does not reflect the benefits that would be derived from a cornerstone share holder with the added value of the likes of which Dean foods has to offer.
Furthermore many of you wrongly assume FF and Deans Food will be the only ones interested in ATM
ATM have massive potential hence my comments in the past that they could be the next coke and don’t be at all surprised that more interested parties come out of the wood work. Personally I believe given a potential take over is circling and A2's potential I now expect it. I also now believe this is the intended game FF is playing.
The likes of Deans food don’t come out of the woodwork to show interest in over priced dogs with no potential so the fact that they are at the table shows that there is much potential in our company.
This company will not be solely purchased, if indeed it is purchased, based on it’s fundamentals but rather on it’s intellectual properties and future potential.

I shall now go back to fishing.

Good post snaps

Yes, a2 is in play. No doubt many are showing interest in both the company and the product as well.

I have a feeling there will be a surprising outcome to all this in due course, the games have just started.

Anybody mentioned merger / reverse takeover yet?

[winner69]

now that would be interesting and I think FF would only have a small role to play if any.
One feels compelled to go along for the ride......

You made a lot of dosh already mate .....why not see what eventuates ...... But be quick when it looks like it all over as it might go back to 50 cents

[NT001]

Interesting story here from the Sydney Morning Herald in which Freedom's boss says there's no big rift with ATM, and its decision to declare its stake in ATM as being available for sale was done for accounting reasons. That was actually made clear at the time, when Freedom had a lousy operating result and needed a bit of accounting hocus-pocus to make its overall result look decent.

http://www.smh.com.au/business/freed...26-ghyhj3.html

[NT001]

If I were Babidge or a member of a2MC's board, I think my inclination would be to say that until we get an actual takeover proposal we will proceed with our plan to issue new shares. We won't just halt our future planning on the basis of some vague expression of interest. Let our shareholders see the colour of your money and then you can do due diligence, after which you can withdraw or revise your offer as you see fit. Could they do that? Babidge sounds a bit put out by the way the offer has come out of the blue, so couldn't he at least throw a bit of a spanner in their works by refusing to call off the cap-raise until they front up with a real offer?

[QFD Sage]

At the end of the day, this is a good news story. Great PR for ATM. Possible sale opportunity if the price is right. If not, hang in there for the long haul. Would love to be a fly on the wall in the ATM board meeting in London this week...!

[NT001]

that exactly what should of happened.
but consider this........FF have been trying to sell their stake..... then ATM approach them about doing a cap raise....this starts a disagreement between FF who are trying to get rid of their stake and know trying to sell their stake would be a lot harder to do with a cap raise hanging around(which is very true) so to generate some interest in their own stake and to halt the cap raise as well as take control of the situation they manoeuvre the game to the current situation.
The current position being cap raise on hold and interest being generated by other parties on buying a portion or all of ATM........... yet at the same time FF have offered nothing binding to ATM. Could be very good positioning by FF.

Do we actually know A2 went to FF about a cap raise? Some of the stories published so far suggest Perich raised it with Babidge. Perich would have known it probably because FF's director on the a2MC board, Melvyn Miles, would have learned about it at the a2MC board table (or in docs). I'm not sure whether Miles, as an independent director of FF who is also FF's rep on the a2 board, is ethically entitled to pass on a2MC's secrets to the FF board, but I presume that happens.

It seems at this stage that the main falling out is between Perich and Babidge, though it's not clear why Perich objects so strongly to a cape raise. Perich is in a position to make FF do whatever he wants, but officially he doesn't really speak for FF. Rory Macleod does, and he says he and Babidge have no problem. The internal dynamics of the Perich-FF combine are not entirely clear. It's also not clear that FF really want to sell their a2MC stake. According to Macleod, that's simply a future option, not a wish or short-term plan.

You say FF have cleverly managed to bring about a hold on the cap raise. Do we know that? Babidge said that demand by FF was a problem, and my impression was that it had not yet been capitulated to.