Murray Goulburn launches $420m bid for Warrnambool Cheese and Butter

http://www.theguardian.com/business/2013/oct/18/murray-goulburn-warrnambool-cheese-and-butter

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Warrnambool Cheese and Butter Factory's second-largest shareholder has launched a $420m bid for the Australian dairy company on Friday, trumping two previous offers and fanning speculation of an even higher bid.

Murray Goulburn Co-operative, which owns about 17% of WCB, is offering $7.50 per share in cash, more than the $7 per share bid from Canada's Saputo.

Australian company Bega Cheese, WBC's largest shareholder with almost 18%, had kicked off the bidding war with an initial cash and share offer worth $5.78 per share in September.

"The question now is what Saputo does from here," said Mark Topy, senior industrials analyst at Canaccord Genuity. "Bega is an outside chance to bid higher but Saputo, they're a big global company, they've got the pockets to bid higher."

Shares in WCB jumped 6% to a record high of $7.90, having traded at around $4.50 per share before Bega's September offer.

Bega could also find itself in Saputo's sights, Topy added.

"They could bid for Bega Cheese and then put their foot on Warrnambool Holdings as well, so the market is pretty hot at the moment."

Australian dairy farmers have been grappling with a supermarket price war that slashed domestic wholesale prices, a strong Australian dollar that crimped exports and a drought that sent cattle feed costs soaring. But growing demand from Asia for dairy products and other sources of protein have attracted international buyers to the sector.

Murray Goulburn also agreed to match the Saputo proposal regarding the payment of a fully-franked special dividend, meaning the total gross proceeds of the takeover was $8.00 per share, according to Rivkin Securities.

"This is a historic opportunity for Murray Goulburn and WCB suppliers and shareholders to create a larger-scale, globally competitive Australian dairy food company, owned and controlled by Australian dairy farmers," Murray Goulburn chairman Philip Tracy said.

"Importantly, it will retain the primary objectives of a co-operative in maximising farm gate returns for farmer owners."

Murray Goulburn said it had secured financing for the deal, which it said would create one of the top-20 dairy companies in the world and protect the interests of Australian dairy farmers.

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