Canada's Saputo on cusp of control in Australia dairy war

Wed Jan 15, 2014 11:21pm EST
 
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SYDNEY (Reuters) - Bega Cheese Ltd BGA.AX said on Thursday it would sell its stake in Warrnambool Cheese and Butter Factory Holdings Co WCB.AX, all but handing victory to Canada's Saputo Inc SAP.TO in the battle for Australia's oldest dairy company.

The sale lifts Saputo to just short of majority control, and is expected to prompt other investors to follow suit. That would allow the Canadian company to claim a win for its base offer of A$515 million ($460 million), ending one of Australia's most competitive takeover battles in recent years.

Bega's decision to sell its 18.8 percent stake gives Saputo 45.2 percent of Warrnambool, based on its most recent shareholding disclosure.

"If I was a punter on this, I would be feeling quite happy for adding my money on Saputo winning this," said Michael Heffernan, senior client adviser at brokerage Lonsec.

The move by Bega leaves rival suitor Murray Goulburn Co-operative Co Ltd with a 17.7 percent stake for now - and little hope of reaching the 50.1 percent stake it needs to make its own A$530 million bid unconditional.

Saputo declined to comment. Murray Goulburn said it would "assess the ramifications" of Bega's move on both its bid and its shareholding.

The battle for Warrnambool reflects the huge interest in Australia's agriculture assets amid surging demand from increasingly affluent southeast Asia. Warrnambool's portfolio includes increasingly popular high-tech milk extracts as well as traditional dairy products.

EXPENSIVE TARGET

A total of nine bids and counter-bids since Bega made the first approach in September has made Warrnambool the world's most expensive dairy company on a price-to-earnings basis. It is trading at 38.2 times its 12 months trailing earnings, according to Thomson Reuters data.   Continued...