Warrnambool Sees ‘Significant’ Risk in Murray Goulburn’s Offer

Warrnambool Cheese & Butter Factory Co. (WCB) said Murray Goulburn Co-operative Co.’s takeover bid needs anti-trust approval and carries a “significant” risk of failure as it recommended a rival offer from Saputo Inc. (SAP)

Warrnambool, Australia’s oldest dairy producer, Nov. 15 accepted the sweetened A$505 million ($473 million) bid, worth A$9 a share, from Montreal-based Saputo. That offer matched the value of a proposal from local rival Murray Goulburn, though it trails the value of a stock-and-cash bid from Bega Cheese Ltd. (BGA)

Saputo’s cash bid, which has been approved by Australia’s Treasury, holds “no risk,” Warrnambool Managing Director David Lord said in a recorded interview posted on the website of the Australian Financial Review today. The competition regulator may take as long as six months to assess Murray Goulburn’s offer, Lord said.

There is “significant completion risk” tied to Murray Goulburn’s offer, Lord said. At the same time, the stock-and-cash bid from Bega holds “inherent risk” for Warrnambool shareholders because of the equity component of the offer, he said.

Lynn Semjaniv, a spokeswoman for Murray Goulburn, declined to comment on Lord’s interview. David Williams, adviser to Bega at Kidder Williams Ltd., said he disagreed with Lord’s assessment of Bega’s share price. Investors have upgraded their valuations of Australia’s entire dairy industry, he said.

Warrnambool’s market value has more than doubled in the two months since Bega, its largest shareholder, made an initial offer and triggered the three-way takeover contest. Bidders are pursuing greater scale to help them tap rising demand for dairy produce, including milk powder, in Asia’s emerging nations.

Shares Halted

Warrnambool closed at A$9.10 in Sydney on Nov. 14. Trading was halted Nov. 15 pending Saputo’s revised offer. Bega has offered 1.5 of its own shares shares and A$2 cash for each Warrnambool share. Bega’s stock closed at A$4.75 on Nov. 15, valuing its proposal at A$9.13.

Bega shares have climbed during the bidding war as Warrnambool shares surged, partly because Bega owns about 18 percent of Warrnambool.

Lord said the “true value” of Bega’s shares “isn’t evident” in Bega’s current stock price.

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

To contact the editor responsible for this story: Jim McDonald at jmcdonald8@bloomberg.net

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