AVONMORE Foods has thrown its merger proposal firmly back into Waterford Foods' court and has, in effect, asked the Dungarvan based coop to indicate the merger terms it would find acceptable.
Yesterday, the boards of Avon more Foods and Avonmore Coop met in Kilkenny to consider the rejection of its merger proposal by Waterford. As expected, Avonmore did not take any final decision on whether to go ahead with a higher offer or abandon the proposal.
Instead, Avonmore reiterated its belief that a merger of the two groups would be in the best interests of both shareholders and milk suppliers in both organisations. Avonmore added: "Avonmore will now seek to determine whether a realistic basis for merger discussions between the two parties exists."
This is seen in the industry as a barely concealed invitation to the Waterford board to indicate the merger terms it would be able to recommend to the coop shareholders.
Avonmore has said repeatedly that it would not put any proposals directly to Waterford shareholders and that any proposal must have the full backing of the Waterford board.
Earlier this month, the Waterford board rejected the offer from Avonmore which put a £281 million valuation on Waterford, proposed substantial increases in milk price and which offered Waterford Coop equal representation on the board of a merged coop.
Waterford rejected these proposals, saying the offer "does not reflect the underlying value of the Waterford business, its strategic positioning in key markets and the contribution it can make to any merged entity in the future".
Waterford also said that it would consider any "equitable" proposal from Avonmore. The Kilkenny group has decided, however, that it not going to get involved in a long drawn process of making further merger proposals to Waterford and has, in effect, told the Waterford board to show its commitment to rationalisation by indicating the terms it would find acceptable.
Market sources expect more toing and froing between advisers IBI, for Avonmore, and NCB, for Waterford. But few in the industry have any great confidence that a deal can be reached that would be capable of being accepted by the 75 per cent majorities required.
There is a strong rump of Waterford Coop shareholders which seemed opposed to any merger which would give Avonmore a majority of a merged group.
Equally, sources believe that Avonmore chief executive Mr Pat O'Neill will be wary of presenting any proposal to his own shareholders unless he is certain of getting their approval.
Avonmore has made it clear that it would not wait indefinitely for a positive response from Waterford and would concentrate on its overseas expansion if the merger was abandoned.
Following the purchase of Beni Foods in Britain, market sources have also indicated that Avonmore is close to an acquisition of a seven million gallon liquid milk business at Swindon in England.
