Melbourne, Jan 19 - Goodman Fielder Ltd may score more than A$500 million ($340 million) for its dairy business if Australia's biggest food company by market value decides to sell the troubled unit.
Parmalat SpA , Italy's biggest listed food group, is looking at making an offer, Italian newspaper la Repubblica said, after losing out to Japan's Kirin Holdings Co Ltd last August in a bid for rival Australian producer Dairy Farmers.
Goodman's dairy unit is one of the leading suppliers of consumer dairy products in New Zealand.
"Maybe since Parmalat missed out on some of the other dairy opportunities in Australia they're looking at New Zealand," said Lindy Newton, analyst at UBS.
"It's definitely been a pretty bad performer for Goodman. Depending what they got for it, it could be accretive to get rid of it. So that could be a positive for Goodman. It totally depends on the price," she said.
Neither Parmalat or Goodman Fielder would comment when contacted by Reuters.
Goodman Fielder paid A$830 million for the dairy business in December 2005. Since then, earnings have halved and it has taken a A$170 million write down.
Still, analysts said Goodman was not a forced seller and would be seeking in excess of A$500 million, noting Kirin's recent A$910 million purchase of Dairy Farmers milk co-operative and high multiples paid by French food group Danone for Frucor, which sells fruit juices and other drinks in New Zealand and Australia.
"They wouldn't be settling for the type of (earnings) multiple (they) originally paid for the business providing they want to maintain a dividend in line with last year," said Nick Berry, analyst at ABN AMRO.
If a buyer were willing to pay enough, Berry said a sale might make sense.
"It would be an opportunity to get out of a business where they are always going to be sub optimal in terms of market share -- a case of if the price is right, getting out of a tough business. They haven't got anything like the returns they would have hoped to when they bought it," he said.
Other potential bidders might include Japan's Kirin or France's Danone , and Singapore's Olam and Saputo Inc. , Canada's biggest cheese maker, which both showed interest in Dairy Farmers alongside Parmalat.
"At the right price we would welcome an exit from fresh dairy," Citgroup Global Markets analyst Andy Bowley said in a report on Monday entitled "Disposing dairy?"
"Goodman Fielder's dairy business is poorly placed strategically. Fonterra acts as both its only supplier and only major competitor. Moreover, its current regulatory protection over milk supply is due to end over the next 4-5 years," he said.
Bowley calculated the business was worth A$350-500 million, based on 7 to 10 times forecast fiscal 2009 earnings of A$50 million before interest, tax, depreciation and amortisation (EBITDA).
"We see upside potential to this range given trough cycle EBITDA and the potential for Japanese interest," Bowley said.
Earnings at the dairy unit fell 32 percent even while revenue rose 19 percent last year as commodity prices hit a record, pushing raw milk costs up 60 percent and prompting some customers to move to cheaper brands as the economy slowed.
Goodman shares finished up 1.7 percent on Monday at A$1.51, up 44 percent from a low of A$1.05 a month ago. Australia's benchmark S&P/ASX 200 index <.AXJO> fell 0.7 percent in the same period.
A week ago, in answer to a query from the Australian Stock Exchange, Goodman Fielder said it was not aware of any information about it which explained recent trading. ($1=A$1.47)