Bega Approached by Global Groups on Warrnambool Cheese Stake

Warrnambool Cheese
Cheese products produced by Warrnambool Cheese & Butter Factory Co. are seen in this undated handout photograph released to the media on Nov. 4, 2013. Source: Warrnambool Cheese & Butter Factory Co. via Bloomberg

Bega Cheese Ltd., the second-largest shareholder in takeover target Warrnambool Cheese & Butter Factory Co., received approaches from global groups for its stake in the Australian dairy producer.

“We’ve had the inquiries that you would expect from some of the key players in the game and we’ve also had some international inquiries external to that,” Bega Chairman Barry Irvin said today in a phone interview, declining to name the groups. “We’ve got to be careful that those inquiries translate into something, rather than just an inquiry and a discussion.”

Canada’s Saputo Inc., Warrnambool’s largest shareholder, is offering A$537 million ($476 million), more than a bid from Murray Goulburn Cooperative Co. They are seeking to acquire Victoria-state based Warrnambool, maker of brands such as Sungold milk and Great Ocean Road cheese, to add production and export infrastructure amid rising demand in Asia.

The international interest in Bega’s 18.8 percent stake may be from hedge funds, private equity groups or global commodity trading houses, said Paul Jensz, a Melbourne-based analyst at PAC Partners Pty. “The Asian, Middle Eastern, European and American buyers of protein always want to know what the opportunities are, they don’t want to leave stones unturned.”

Bega Options

Saputo will pay a maximum A$9.60 cash a share on the condition it gains more than 90 percent of Warrnambool, the Montreal-based company said Dec. 17 in a statement. The offer beats a A$9.50 bid from Murray Goulburn, which requires approval from the Australian Competition Tribunal to complete any deal. Warrnambool traded below both bids and rose 0.1 percent to A$9.15 at the close of trade in Sydney.

Bega closed its own offer for Warrnambool last month and is considering its position, Irvin said. “The options we have are to continue to hold the stake, to think about selling to one of the bidders, or to sell to one of the external parties. All those options are on the table.”

Advisers to Bega are holding discussions with both Saputo, which said Dec. 17 it will close its offer on Jan. 10, and Murray Goulburn, Irvin said.

Fonterra Cooperative Group Ltd., which acquired a stake in Bega in November, hasn’t approached the dairy producer over any takeover, Irvin said. The world’s largest dairy exporter holds 9 percent of Bega, according to data compiled by Bloomberg.

“It would be quite a complex thing to execute because of our constitution, so I would not expect that Fonterra would undertake something like that without talking to us and they haven’t,” Irvin said. Bega’s constitution limits a shareholder to take a stake of 10 percent.

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