Australia’s biggest milk processor Murray Goulburn has moved to try and grab front position in the continuing, and increasingly expensive battle for small Victorian dairy group, Warrnambool Cheese and Butter (WCB).
A day after Federal Treasurer Joe Hockey controversially gave Saputo of Canada the greenlight for its $8 a share offer (without any conditions), Murray Goulburn emerged with an $9 a share offer.
That now values Warrnambool at $504 million.
The continuation of the great milk auction of 2013 brightened what was otherwise a fairly gloomy day on the market which fell sharply, off more than 1.4%.
But Murray Goulburn (MG) owns around 17% of Warrnambool, so it only needs to find around $420 million or so in cash.
It said yesterday its gearing would rise to 56.7% if the all cash bid was successful.
That will force Saputo to go higher, and puts the wood on Bega Cheese (BGA) which kicked the bidding war off on September 12 with its 1.2 share and $2 cash offer which valued Warrnambool at $5.78 a share, or around $320 million.
Bega’s offer was worth around $7.57 a share. Its shares ended at $4.64 yesterday, up 6.4%.
BGA Vs WCB YTD – The great milk auction rolls on.
Warrnambool shares naturally leapt past $9 as more hedge funds and day traders hopped in for the next offer (if it comes). They ended more than 6% up at $9.08.
Saputo had initially offered $7 a share before increasing its offer to $8 after Murray Goulburn offered $7.50 last month. Both offers are all cash. Saputo’s offer is the only one with the nod from the Warrnambool board.
They have rejected Bega’s offer and not really taken Murray Goulburn seriously up to this week, when the company revealed it was taking the MG offer "seriously".
Now they might have to as the new $9 a share offer is very serious.
Murray Goulburn managing director Gary Helou again played up the benefits of his group’s bid saying:
‘‘A combined MG and WCB will create a globally competitive dairy food company which will deliver many opportunities for Australian dairy farmers and their communities."
‘‘WCB suppliers joining an enlarged cooperative will benefit from cooperative ownership focused on maximising farm-gate milk prices, including able to participate in any futures to MG’s capital structure that may arise as a result of the review that was recently announced to MG suppliers.’’
In its statement yesterday MG said, "it is confident that the combination of MG and WCB will deliver positive outcomes to both MG and WCB suppliers and flow on benefits to the broader community as a whole.
"It will also create substantial public benefits with a large domestic supplier having the scale and strength to compete internationally and thereby grow Australian export volumes and revenues with profits going back to our shareholder’s local communities.
"MG is therefore confident in its approach to satisfying the ACCC/authorisation condition in relation to the Revised Offer. MG expects to lodge its application for merger authorisation with the Australian Competition Tribunal by the end of November."
Lion Nathan which owns National Foods (Pura Milk) and Dairy Farmers bought a blocking stake in Warrnambool a couple of weeks ago of around 9%, at prices up to $9.25.
Although Bega’s bid is the lowest, but it the only one that go unconditional (later this month), with Saputo’s bid subject to buying 50.1% of WCB’s shares and Murray Goulburn needing the greenlight from the ACCC (which has rejected a previous bid for Warrnambool).
Bega also owns around 17% of Warrnambool and is looking at a juicy profit already on its original cost. Fonterra, the huge NZ dairy giant, has grabbed a 6% or so stake in Bega.
Both companies have a had a marketing agreement for the past 12 years covering Bega Cheese products.
