Japan’s Kirin Buys Warrnambool Stake Amid Dairy Bidding War

Kirin Holdings Co. (2503), Japan’s largest beverage maker, bought a 9.99 percent blocking stake in Warrnambool Cheese & Butter Factory Co., the Australian dairy producer that’s the target of three takeover offers.

Warrnambool shares rose to a record today in Sydney trading before Kirin’s Australian unit disclosed the purchase in a statement. Canada’s Saputo Inc. (SAP), Murray Goulburn Cooperative Co. and Bega Cheese Ltd. (BGA) made bids seeking to add the company’s production and export infrastructure to meet demand in Asia.

Kirin’s “immediate thought will be to prevent Saputo from getting Warrnambool,” said Mark Topy, a Melbourne-based analyst with Canaccord Genuity Group Inc. “Kirin may have their own ambitions in terms of the dairy sector and further consolidation and being a player in that.”

Warrnambool (WCB) closed up 5.3 percent in Sydney trading today at A$8.80, giving it a market value of A$493 million ($469 million). The producer, which supplies milk to make Philadelphia cream cheese, relies on exports for most of its sales and last year made 143,000 metric tons of dairy produce including cheese, milk powder and infant-formula ingredients.

Asia Demand

Competition for Warrnambool, which also makes brands including Sungold milk and Great Ocean Road cheese, comes as dairy demand rises in India, Indonesia and Vietnam. China, the world’s most populous nation, is setting records for milk-powder imports to fill its milk production deficit.

Warrnambool signed an agreement to negotiate with Toong Yeuan Enterprise Co. to act as sole distributor of its infant formula and other lactoferrin products in China, Hong Kong and Taiwan, the Victoria state-based company said in a statement today after the market closed.

The 125-year-old company sees prices for exports rising this year on demand in Asia, forecasting exported milk powder will advance 33 percent, butter climb 16 percent and cheese rise 12 percent, it said in an Oct. 9 presentation.

Bega Cheese holds 18 percent of Warrnambool and Murray Goulburn holds 17 percent, according to data compiled by Bloomberg.

Saputo’s offer needs approval of the holders of 50 percent of Warrnambool’s shares, the Canadian producer said in an Oct. 25 statement. Kirin’s Australian unit, Lion, may be betting that other holders will join it to block the deal, Canaccord’s Topy said. “It seems a little aggressive, but makes some sense,” he said.

Warrnambool supplies as much as 20,000 tonnes of cheddar cheese a year for Lion’s Coon and Cracker Barrel brands and leases cutting and wrapping facilities to the Kirin unit, the dairy producer said in an April 11 presentation.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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