Avonmore urges investors to back merger

AVONMORE Foods has urged its shareholders to accept the proposed merger with Waterford Foods at an extraordinary general meeting to be held next month. The shareholders have been told that Avonmore has continued to trade satisfactorily and in line with expectations since the last financial year ended on January 4th 1997. The documents dealing with the merger, which were posted to shareholders yesterday, also reiterated that the outlook for the enlarged group was positive.

Mr John Dowley, chairman of Waterford Foods, has recommended acceptance of the deal. One director, Mr John FitzGerald, is opposed and he describes the offer as "opportunistic".

The deal needs a 75 per cent acceptance rate at two special general meetings of Waterford Co-op.

A spokesman for Waterford last night noted that a recent poll in the Farmers Journal indicated that 74 per cent of Waterford farmers were in favour of the deal - a big swing in favour from a previous poll - and 78 per cent of Avonmore farmers were in favour. The two special meetings will take place next month.

A pro-forma balance sheet of the enlarged group shows net borrowing of £397 million.

The offer involves the issue of 29 Avonmore shares for every 50 Waterford shares. This gives Avon more shareholders 60 per cent and Waterford 40 per cent of the enlarged group. However, as Avonmore's shares have risen sharply since the offer was made, this increases the value to farmers of the proposed share spin-out - those shares given back to farmers of both co-ops after the merger - to £90.5 million, compared with £79 million at the May share price.

The documents pointed out that the offer values each Waterford Foods ordinary share at 162p, a premium of more than 100 per cent on the price on April 10th, the day before the initial offer was made.

Under the proposals, milk suppliers to Waterford will receive from Waterford a once-off additional payment for milk supplied from January 1st 1997 until the date the merger becomes effective.