Could Bega Cheese and perhaps its Canadian owned rival Saputo (which owns Warnambool Cheese) end up buying control of industry leader, the troubled Murray Goulburn.
Friday’s annual meeting of security holders in the listed MG Trust (associated with Murray Goulburn) could confirm the prospects of a sale and purchase.
According to market sources both are the front runners for the acquisition of the troubled giant, which controls the Devondale brand of dairy products and is still the biggest single processor of milk in Australia.
Murray Goulburn confirmed last month that it has had approaches from a number of suitors interested in either buying some assets or taking over the whole co-operative.
Market analysts say Fonterra, the Kiwi dairy giant would fancy its chances but might be stymied by competition regulators. Together the two would control around 45% to 50% of the total industry output of just over 9.2 billion litres of milk a year.
In any case Fonterra management said last month that the company has seen milk volumes grow 20% to 25% since Murray Goulburn first got into problems more than a year ago and cut returns to its suppliers.
Bega Cheese directors and managers were tight-lipped about its ambitions for Murray Goulburn at its 2017 annual meeting yesterday.
Bega executive chairman Barry Irwin and chief executive Paul van Heerwaarden did not mention Murray Goulburn at its annual general meeting at Kalaru on the far NSW south coast NSW yesterday (Tuesday).
Mr van Heerwaarden however did say Bega’s very strong balance sheet put the company in a position to consider growth opportunities, including those in dairy and those that went beyond dairy products.
Earlier this year Bega picked up some grocery brands, including Vegemite, from US packaged food giant Mondelez for $460 million (owned by Kraft). It sold one of its milk products processing factories to US giant, Mead Johnson to help pay for the Kraft deal.
“Bega Cheese has always maintained a strong balance sheet believing that we should be in a position to respond to business opportunities if and when they present themselves,” Mr van Heerwaarden told yesterday’s annual meeting.
Mr Irwin told Bega shareholders that Bega had become the company of choice for Australian dairy farmers over the past few years.
"We’ve had a phenomenal inquiry from dairy farmers wanting to transfer supply to us," Mr Irwin said.
"We did accept some in the 2017 financial year and have clearly taken more this year as our capacity has allowed us to."
In August, Murray Goulburn reported a $370.8 million loss for the year to June 30 amid plummeting milk supplies and big asset write downs and the costs of plant closures in Victoria and Tasmania.
Murray Goulburn is expected to say more about an extensive review of its operations and any sale process at its annual general meeting on Friday.
Bega shares fell 0.9% $7.58. Nerves?
