Bega Cheese Bid for Warrnambool Can Proceed, Says Regulator

Bega Cheese Ltd. (BGA), the underbidder in the battle for Warrnambool Cheese & Butter Factory Co., won Australian regulator approval for its A$407 million ($396 million) offer for the diary producer.

The approval makes Bega the only of three bidders for Warrnambool to be cleared, as Saputo Inc. (SAP)’s A$449 proposal is being reviewed by Australia’s Foreign Investment Review Board and Murray Goulburn Cooperative Co. seeks regulatory clearance through the Australian Competition Tribunal. Bega is considering its options over improving its offer, Executive Chairman Barry Irvin said Oct. 21 in an interview.

“A merged Bega and Warrnambool Cheese & Butter would continue to be constrained by other dairy manufacturers that they compete more closely with in the acquisition of raw milk, including Murray Goulburn,” Australian Competition and Consumer Commission Chairman Rod Sims said in the statement.

Montreal-based Saputo won support from Warrnambool’s board with an improved offer of A$8 a share made last week, topping a A$7.50 per share cash proposal from Murray Goulburn Cooperative Co. and above Bega’s cash and shares offer. Bega closed yesterday in Sydney at A$4.39, making its offer of 1.2 shares and A$2 cash for each Warrnambool share worth A$7.27.

Warrnambool fell 0.8 percent to A$8.29 at 10:25 a.m. in Sydney trading.

Dairy Demand

The contest for Warrnambool, which makes brands including Sungold milk and Great Ocean Road cheese, comes as bidders attempt to raise production and add export infrastructure amid rising demand in Asia. China, the world’s most populous nation, is setting records for milk-powder imports to fill its milk production deficit, while dairy demand is rising in India, Indonesia and Vietnam, the Victoria-state based company said in an Oct. 9 presentation.

Kirin Holdings Co. (2503), Japan’s largest beverage maker, bought a 9.99 percent stake in Warrnambool on Oct. 29, the company said in a statement. Kirin’s Australian unit Lion, which has a contract with Warrnambool to manufacture cheese for its Coon and Cracker Barrel brands, may be seeking to block a Saputo takeover, according to Canaccord Genuity Group Inc.

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

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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