An Australian investment research company is recommending people sell Goodman Fielder shares ahead of a proposed scheme to buy the food manufacturing company.
Wilmar International and the Hong-Kong-listed First Pacific are offering 67.5 Australian cents a share for Goodman Fielder, valuing the company at $A1.32 billion.
The trans-Tasman food giant's brands include Meadowlea, Praise, Vogels and Edmonds.
But Morningstar senior analyst Peter Rae said the offer price still overvalued Goodman Fielder by 35 percent, compared with his valuation of 50 cents a share.
"Our view of outlook for Goodman Fielder is not that positive. They've been hit on a number of fronts - input costs have gone up and they've found it difficult to pass those on in terms of pricing," Mr Rae said.
Australia had the supermarket duopoly of Coles and Woolworths, and they effectively set the pricing, he said. That meant Goodman Fielder had no real pricing power, and its margins were squeezed.
"It's not a good environment for that business to be operating in, and that's behind our forecasts which give our fair value estimate of 50 cents a share."
Morningstar also said in its report on Goodman Fielder that it had a degree of high uncertainty, which made it hard to forecast its earnings.
That was because it was hard to estimate the cost of such things as dairy products and wheat, which went into Goodman Fielder goods, and that could have a major impact on their earnings.
