Schism emerges between A2 and Freedom

A schism has emerged between takeover target A2 Milk [NZX: ATM] and its controlling shareholder Freedom Foods in comments from A2 boss Geoffrey Babidge reported by The Australian.

The newspaper is reporting that Mr Babidge was blindsided by a takeover approach from Freedom and US company Dean Foods, revealed on Monday, after a disagreement with Freedom over strategy.

It quoted Mr Babidge: “Until recently Freedom Foods has had two appointees to the a2 Board, and currently has one appointee. Both have for several years participated in the formulation of board strategy and have a clear knowledge of current strategy.

“There had never been any indication other than support from Freedom for the company’s strategy until very recently.’’

According to the report, talks took place between Mr Babidge and Freedom director Tony Perich four weeks ago in which A2’s plans to raise capital to finance growth in the US were questioned by Mr Perich. Mr Perich was also said to have been unhappy with the share price performance of A2 and its strategy.

“The company had no knowledge of any potential bid. In fact every indication from Freedom had been it was not a long-term holder of its shareholding,’’ Mr Babidge reportedly said.

In its half-year report published in February Freedom said it had reclassified its investment in A2 as “available for sale” because of the resignation of Freedom chairman Perry Gunner from A2’s board.

However, it also said it intended to retain a strategic holding in the medium term “while retaining the option to realise capital from the investment to support growth opportunities.”

ASX-listed Freedom Foods owns 17.8% of A2 Milk, while the Perich family, Freedom’s controlling shareholders, owns a further 1.3%.

In his comments to The Australian, Mr Babidge also said: “I have enjoyed a fruitful and respectful business relationship with Tony Perich and his family for more than 15 years and I’m hopeful this will continue.”

Mr Babidge and Mr Perich could not immediately be reached for comment on the report.