Dairy chief on attack over foreign raids

Australia's dairy processors will be "absolutely whacked" by multinationals unless a super co-operative is formed, Murray Goulburn managing director Gary Helou says.

Australia's dairy processors will be "absolutely whacked" by multinationals unless a super co-operative is formed, Murray Goulburn managing director Gary Helou says.

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."

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