Bid Battle Intensifies for Australian Dairy Producer Warrnambool Cheese & Butter

October 18, 2013 Leave a comment

Oct 17, 2013

Bid Battle Intensifies for Australian Dairy Producer

GILLIAN TAN

It’s now a three-way battle for one of Australia’s largest-listed dairy companies. Australia’s Murray Goulburn Co-operative Co. Ltd has made a takeover offer for Warrnambool Cheese & Butter Factory Co. Holdings Ltd. that values the dairy producer at 420 million Australian dollar (US$404 million), trumping two rival bids. The combination of Warrnambool Cheese & Butter and farmer-controlled Murray Goulburn would make it one of Australia’s five largest food and beverage companies, with expected revenues of more than A$3.2 billion and export sales of A$1.4 billion to more than 60 countries.  It expects to process more than 4 billion liters of milk annually from more than 3,000 suppliers.“This is a historic opportunity for Murray Goulburn and Warrnambool Cheese & Butter suppliers and shareholders to create a larger scale, globally competitive Australian dairy food company,” Murray Goulburn chairman Philip Tracy said in a statement.  Should the deal proceed, the new entity will be named Murray Goulburn Warrnambool.

Murray Goulburn’s A$7.50 a share offer represents a 66% premium to Warrnambool Cheese & Butter’s closing price on Sept. 11, the day beforeBega Cheese Ltd.BGA.AU 0.00% tabled a cash-and-scrip offer worth A$6.62 a share currently. It also represents a 7% premium to Canada’sSaputo Inc.SAP.T -0.68%’s A$7.00 a share offer.  Saputo’s offer was recommended by Warrnambool’s directors on Oct. 8 in the absence of a higher offer.

KPMG Corporate Finance, as independent expert, valued Warrnambool Cheese & Butter’s shares at between A$6.96 and A$7.49 a share on Oct 14.

Lazard Inc.LAZ +1.90% is advising Murray Goulburn, which already owns a 17.3% stake in Warrnambool Cheese & Butter. Kidder Williams is advising Bega Cheese, which has an 18% stake in Warrnambool Cheese & Butter. CIMB Group Holdings Bhd1023.KU +0.40% is advising Warrnambool Cheese & Butter, while Rothschild and Rabobank are advising Saputo.

Like Bega, Murray Goulburn’s offer for Warrnambool Cheese & Butter is conditional upon approval from the Australian Competition and Consumer Commission. The ACCC is expected to announce its verdict on Bega’s proposal on Oct. 31.

Murray Goulburn Tops Saputo With A$420 Million Warrnambool Bid

Murray Goulburn Cooperative Co., Australia’s biggest milk processor, joined a three-way contest for Warrnambool Cheese & Butter Factory Co., making a bid valued at A$420 million ($404 million).

Murray Goulburn, Warrnambool’s second-largest shareholder, offered A$7.50 cash a share, for the maker of brands including Sungold and Warrnambool cheddar, it said today in a statement. It’s priced at 7.1 percent more than Saputo Inc. (SAP)’s A$7 offer and 13 percent above Bega Cheese Ltd. (BGA)’s cash and share bid.

Buying Warrnambool, which also supplies milk to make Philadelphia cream cheese, would give the farmer-owned co-operative control of a neighboring processor as demand in Asia climbs. Warrnambool relies on exports for most of its sales and last year made 143,000 metric tons of dairy produce including cheese, milk powder and infant-formula ingredients.

A deal presents “compelling strategic benefits to all stakeholders, keeping profits onshore, maximizing total farm gate returns to farmer shareholders and increasing the capacity for significant investment in the domestic dairy sector,” Murray Goulburn Managing Director Gary Helou said in the statement.

Murray Goulburn, which had its 2010 bid for Warrnambool rejected, made a bid priced at 1 percent more than Warrnambool’s closing price of A$7.42 yesterday. The maker of Devondale milk and cheese said it obtained A$350 million in extra debt facilities to help fund the purchase.

Murray Goulburn holds 16 percent and Bega Cheese holds 18 percent of Warrnambool, according to data compiled by Bloomberg. The bidder is being advised by Lazard Ltd.

China, the world’s most populous nation, is setting new records for milk-powder imports, and demand for produce in India is outstripping local production, Warrnambool said in an Oct. 9 filing. This year, the price of exported milk powder will surge 33 percent, butter will rise 16 percent and cheese will climb 12 percent, the company said.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

 

Filed under Macro Trends

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