ACCC clears Bega's WCB bid

DataRoom: Watchdog says merger likely to face natural competition constraints.

In the latest development of the long-running takeover saga, the Australian Competition and Consumer Commission has announced it will not oppose Bega Cheese's (BGA) acquisition of Warrnambool Cheese and Butter Factory Company Holdings (WCB).

In a statement the ACCC said it had considered that Bega and Warrnambool each operate dairy manufacturing plants that produce a range of processed dairy products and compete for the acquisition of raw milk from dairy farmers, but still deemed the takeover bid not anti-competitive.

"The ACCC considered that there was limited overlap between Bega and Warrnambool Cheese and Butter in relation to the acquisition of raw milk in the dairy region in south west Victoria (and areas of northern Victoria),” ACCC chairman Rod Sims said.

"The ACCC concluded that a merged Bega and Warrnambool Cheese and 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 and Fonterra."

Mr Sims added that Murray Goulburn and Fonterra, being the largest suppliers of each of the processed dairy products supplied by Bega and Warrnambool, would also be likely to competitively constrain the parties, in the event that they merge.

"The ACCC considered that in addition to competition from domestic dairy manufacturers, imports are also likely to exert a degree of competitive pressure in the wholesale supply of the dairy products supplied by Bega and Warrnambool Cheese and Butter," the statement said.

Long-gestating takeover battle not over yet

The battle for Warrnambool has escalated in recent weeks after the dairy group's board unanimously backed an increased takeover bid from Canadian dairy giant Saputo.

Warnnambool said Saputo had boosted its offer by $1 a share, taking its bid from $7 a share to $8 a share. This would value the company at $448.8 million on a fully diluted basis.

The Warrnambool board said, in the absence of a superior bid, it unanimously recommended the revised offer from Saputo.

Bega is among the other bidders for WCB, having offered $2 cash and 1.2 Bega shares, worth $7.27 per WCB share, for WCB. Murray Goulburn has offered $7.50 per share in cash.

Since then, however, Japanese-owned Lion has purchased a 9.9% stake in Warrnambool, inserting itself as a key player in the takeover battle.

Bega has expressed its openness to discussions with Lion in pursuing Warrnambool.

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