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Bega Raises Warrnambool Bid to $454 Million in Dairy Tussle

Sungold Milk Powder
Sungold milk powder manufactured by Warrnambool Cheese & Butter Factory Co. Source: Warrnambool Cheese & Butter Factory Co. via Bloomberg

Bega Cheese Ltd., one of three bidders for Warrnambool Cheese & Butter Factory Co., raised its cash and share offer, valuing the Australian producer at A$486 million ($454 million).

Warrnambool’s largest shareholder raised its offer to 1.5 shares and A$2 for each of the target’s shares, the New South Wales state-based company said today in a statement. The bid values the dairy producer at A$8.68 a share, below yesterday’s A$9 a share offer from Murray Goulburn Cooperative Co. and 9 percent more than Saputo Inc.’s A$8 a share proposal.

The three-way contest for the maker of brands including Sungold milk and Great Ocean Road cheese has more than doubled Warrnambool’s market value in the two months since Bega’s initial bid of 1.2 shares and A$2. The bidders are seeking to raise production and add export infrastructure amid rising demand in Asia.

“This is now in the same ballpark” as Murray Goulburn’s bid and could rise above the rival offer dependent on the performance of Bega’s shares, which traded above A$5 on Nov. 4, said Paul Jensz, a Melbourne-based analyst with PAC Partners.

Shares in Warrnambool were unchanged at A$9.10 in Sydney trading. Bega’s shares declined 2.8 percent to A$4.45.

“The proposed increased offer consideration will be Bega Cheese’s final offer and will not be further increased,” Chairman Barry Irvin said in the statement.

Main Sites

Under Bega’s offer, Warrnambool’s name, brands and main operating sites would be retained, Irvin said. Bega holds 18 percent of Warrnambool and Murray Goulburn holds 17 percent, according to data compiled by Bloomberg.

Bega and Canada’s Saputo have won approval from regulators, while Murray Goulburn said Nov. 13 it be may late February before it receives a decision on its proposal from the Australian Competition Tribunal.

“Murray Goulburn may have another three to six months of going through competition regulators, that has some uncertainty around it,” said PAC Partners’ Jensz.

Japan’s Kirin Holdings Co. bought a 9.99 percent stake in Warrnambool last month, seeking to protect an arrangement under which the producer supplies at least 12,000 metric tons of cheddar each year for its Australian unit’s Coon and Cracker Barrel cheese brands. Fonterra Cooperative Group, the world’s largest dairy exporter, said Nov. 1 it had acquired a 6 percent stake in Bega.

While Montreal-based Saputo, Canada’s largest dairy processor, has the capacity to raise its offer, it may question the value of doing so, Jensz said.

“They have the whole world to invest in, you would be paying a premium price for a reasonable asset here,” Jensz said. “They need to compare that against other opportunities and at some point they may back away and look elsewhere.”

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