January 7, 2014 / 4:18 AM / 4 years ago

UPDATE 1-Battle for Australian dairy firm drags on as local bidder refuses to bow to Canadians

* Saputo offer deadline on Friday; analysts expect extension

* Hearing into Murray Goulburn bid scheduled for Feb. 10

* Regulator expected to rule on Murray Goulburn bid by Feb-end

By Jane Wardell

SYDNEY, Jan 7 (Reuters) - A months-long fight for Australia’s oldest dairy firm battles on into the new year as local bidder Murray Goulburn Co-operative Co Ltd refuses to concede to rival suitor Canada’s Saputo Inc, which has already secured regulatory approval.

Murray Goulburn said on Tuesday it may increase its stake in Warrnambool Cheese and Butter Factory Holdings Co via on-market purchases.

The company also said it expects a regulatory decision on its A$530 million ($474.96 million) offer by the end of February.

That is well short of the three to six months that analysts had anticipated the Australian Competition Tribunal might take to reach a decision, potentially breathing new life into the Murray Goulburn offer.

At stake is a platform for rapidly growing sales of both traditional dairy products and high-tech milk extracts into China.

While Murray Goulburn’s bid is higher than Saputo’s A$515 million offer, the Canadian firm has the advantage of an unconditional approach and the backing of the regulators as well as the Warrnambool board.

“The issue is whether Saputo will really ram home their advantage and basically say the deal’s on the table now, you need to get it done by the end of January or the deal goes, which in my personal take, is unlikely,” said IG analyst Evan Lucas.

Saputo’s offer is due to close on Friday, although analysts expect the company to extend the offer period.

Saputo sweetened its bid last month, increasing the value with incremental acceptance levels from A$515 million at 50 percent acceptances. It will rise as high as A$549 if it receives acceptances of 90 percent or more of Warrnambool shareholders. As at Dec. 24, it had acceptances worth 17.9 percent.

Saputo needs to win over former bidding rival Bega Cheese Ltd, which pulled out of the race in December, or Japanese beverage giant Kirin Holdings Co Ltd.

Bega and Murray Goulburn both own around 18 percent of Warrnambool, while Kirin holds 10 percent through its Australian subsidiary Lion Co.

Analysts say that could be a tough task, given Bega is rumoured to be speaking with other potential purchasers and Kirin is likely to be protective of its production and distribution deal with Warrnambool.

Warrnambool supplies Lion with basic-level cheeses, with Lion cutting and wrapping the cheeses.

A Kirin investor relations official said late Monday it would be difficult to replace Warrnambool’s production, but declined to specify the volume of production.

The official said Kirin would not use the stake, bought in October as the bidding war heated up, as a “foothold to become involved in a bidding war”.


The Australian Competition Tribunal has scheduled a five-day hearing into Murray Goulburn’s offer to start on Feb. 10.

The timing for its potential decision is crucial.

“The tribunal is focused on determining the application by the end of February, though it remains a matter for the Tribunal to decide whether that period will ultimately need to be extended,” Murray Goulburn said in a statement.

Murray Goulburn said it had a “compelling” case for Tribunal approval, saying a deal would increase Warrnambool’s international competitiveness, promote scale efficiencies in milk supply, transport, production and management.

The Australian suitor has also targeted Warrnambool’s strong farmer and supplier shareholder base, promising to return any financial benefits will be returned to farmers thanks to its co-operative structure.

Warrnambool on Tuesday reiterated its recommendation that its shareholders reject the Murray Goulburn offer, saying it was highly conditional and uncertain. Saputo and Bega had no official comment.

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