Dairy chief on attack over foreign raids
As the fight for Warrnambool Cheese and Butter reaches its zenith, Murray Goulburn will make direct appeals to WCB shareholders at two public meetings this week, in western Victoria and South Australia.
Mr Helou's pitch will focus on keeping WCB in Australian hands, saying a merger with Murray Goulburn would create a top 20 global dairy company, which would be insulated from foreign takeover threats.
"If we remain a $500 to $600 million dollar turnover business, well guess what? The big guys are going to come in and whack you," Mr Helou told Murray Goulburn shareholders at the co-operative's annual meeting in Melbourne on Friday.
"Absolutely whack you like they've done with Warrnambool.
"It's not of a scale that can defend itself. Warrnambool and us [would] achieve a defendable base."
Timing is now crucial for Murray Goulburn to win over WCB shareholders. Canadian dairy company Saputo, which has the support of WCB's board, can start paying shareholders from next week, having declared unconditional its offer of $9 cash a share, or $505 million.
The offer from the third suitor, Bega Cheese, closes this Thursday. Its bid of $2 cash a share plus 1.5 Bega shares is also unconditional and was worth about $9.06 based on Friday's close.
Murray Goulburn, which has offered $9 cash a share, meanwhile is "handicapped" because it has to wait for approval from the competition regulator. That approval could take up to six months.
Some analysts have suggested Murray Goulburn should team up with Bega to squeeze out Saputo, with the two companies owning about 35 per cent of WCB.
But Mr Helou told Murray Goulburn shareholders that the board was not considering that option.
"The brutal reality is we are not going to sell into Bega," he said. "Bega has got to sell into us, or merge with us.
"We are a co-operative. We don't want to mess with that structure. It's absolutely non-negotiable."
Mr Helou said elevating Murray Goulburn, Australia's biggest dairy company, to a giant co-operative would secure a viable dairy industry that would be focused on lifting milk cheques for farmers.
He said merging WCB with Murray Goulburn would help achieve that aim because it would combine Australia's No. 1 and No. 2 dairy exporters to create a "super-sized exporting company, which can harness efficiencies and synergies and get scale and capability".
"This is a model that just doesn't work here. It works fantastically in New Zealand and America and right through Europe. The top two dairy companies are co-operatives, Fonterra [in New Zealand] and Dairy Farmers of America.
"We absolutely believe that aggregating smaller dairy companies around big Murray Goulburn, commercially well run, well governed, efficient ... is the only way."
Mr Helou again dismissed suggestions that the $505 million price tag for WCB would create too much debt for Murray Goulburn, with its gearing just under 57 per cent if its bid was successful.
The fierce bidding for WCB has made it the world's most expensive dairy company on a price-to-earnings basis. It trades at 38.3 times its 12 months trailing earnings, according to Thomson Reuters data.
"People are talking about multiples being very high," Mr Helou said.
"But Warrnambool for $500 million is not a lot of money for the big guys. The multiples might be crazy but the quantum of dollars ... is not that much."
Frequently Asked Questions about this Article…
Murray Goulburn is interested in merging with Warrnambool Cheese and Butter to create a top 20 global dairy company that would be insulated from foreign takeover threats. The merger would combine Australia's No. 1 and No. 2 dairy exporters, creating a super-sized exporting company that can harness efficiencies and synergies.
Forming a super co-operative in the dairy industry would help protect Australian dairy processors from being overtaken by multinationals. It would create a defendable base, secure a viable dairy industry, and focus on lifting milk cheques for farmers by aggregating smaller dairy companies around a large, well-governed entity like Murray Goulburn.
Murray Goulburn has offered $9 cash per share for Warrnambool, which is similar to the offer from Canadian dairy company Saputo. However, Saputo's offer is already unconditional, while Murray Goulburn is waiting for approval from the competition regulator. Bega Cheese has also made a bid, offering $2 cash per share plus 1.5 Bega shares, valued at about $9.06.
Murray Goulburn faces the challenge of waiting for approval from the competition regulator, which could take up to six months. This delay puts them at a disadvantage compared to Saputo, whose offer is already unconditional. Additionally, there is competition from Bega Cheese, which has also made a bid for Warrnambool.
The price for Warrnambool is considered high because it is the world's most expensive dairy company on a price-to-earnings basis, trading at 38.3 times its 12 months trailing earnings. Despite the high multiples, Murray Goulburn's managing director argues that $500 million is not a lot of money for large companies.
Murray Goulburn is not considering merging with Bega Cheese. The managing director, Gary Helou, stated that they are not going to sell into Bega and that Bega would need to sell into or merge with Murray Goulburn. They are committed to maintaining their co-operative structure, which is non-negotiable.
Murray Goulburn plans to secure a viable dairy industry by elevating itself to a giant co-operative, which would focus on lifting milk cheques for farmers. By merging with Warrnambool, they aim to create a super-sized exporting company that can achieve scale, capability, and efficiency.
Timing is crucial for Murray Goulburn's bid for Warrnambool because Saputo's offer is already unconditional, allowing them to start paying shareholders soon. Murray Goulburn needs to win over Warrnambool shareholders quickly, as they are waiting for regulatory approval, which could delay their ability to finalize the acquisition.
Call 1300 880 160
Start a chat
Schedule a call
