Murray Goulburn mulls partial float as WCB battle draws out

Murray Goulburn is preparing its shareholders for the possibility of a partial float of the co-operative as it continues its fight to take over Warrnambool Cheese & Butter.

Murray Goulburn is preparing its shareholders for the possibility of a partial float of the co-operative as it continues its fight to take over Warrnambool Cheese & Butter.

Murray Goulburn, Australia's biggest dairy company, is expected to make an announcement at its annual meeting in Melbourne on Friday about a potential capital raising. It comes nine months after the company started a funding review to deliver its growth and expansion strategy, which includes the possible takeover of WCB.

MG is involved in a three-way global tussle for WCB. It has offered $9 cash per share, or $505 million, which Canadian dairy group Saputo matched last Friday. MG's bid is not dependent on a float, but analysts have said the co-operative would need to pare back its gearing, which would be just below 57 per cent if its bid for WCB was successful.

In a letter to shareholders and suppliers sent on September 2, Murray Goulburn managing director Gary Helou listed funding options that would be needed during the next five years to upgrade capacity and meet international demand for UHT products, infant formula and cheese.

The options were: increasing debt, selling and leasing back assets, retention of profits, raising additional equity from farmer shareholders, and/or raising equity from external investors.

MG's co-operative structure and farmer control were not being reviewed, Mr Helou said.

"We believe this structure is an integral part of our success and I want to reassure all supplier/shareholders that we are not proposing any change to it."

Last week Mr Helou used Fonterra's set-up of a non-voting shareholders' fund as an example to access capital. At the time of its launch in November last year, Fonterra said the fund raised $NZ525 million.

PAC Partners agribusiness analyst Paul Jensz said a partial float made sense for MG, which owns about 17 per cent of WCB.

"All these groups want to make sure that they use their co-operatives' benefits and any access to external capital they need to be on top off," Mr Jensz said.

"If their peer is doing the same thing they don't want to be at a disadvantage when and if interest rates go a certain way, or risk tolerance with equity investors changes as well."

MG's bid for Warrnambool failed to win the support of WCB's board, which has backed Saputo's revised bid, which chief executive Lino Saputo Jr. declared would be unconditional.

MG's bid hinges on approval from the Australian Competition Tribunal, which could take up to six months to reach a decision.

Stalemate threat— Page 32

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