Third suitor trumps dairy bids
The move marks the latest twist in the three-way battle for the western Victorian agribusiness player after NSW-based Bega Cheese Ltd initially made a move on WCB.
Murray Goulburn said it would offer $7.50 cash per WCB share. This tops the $7 cash offer from Saputo and represents 13 per cent premium to the implied value of Bega's scrip-based offer.
Shares in WCB jumped 49¢ to close at $7.91
A co-operative owned by farmers, Murray Goulburn remains in a key position given it already has an 18 per cent stake in WCB.
Combined, the two companies would create one of the largest Australian-owned food and beverage businesses with annual revenues in excess of $3.2 billion.
The combined milk supply of Murray Goulburn and WCB is forecast to be more than 4 billion litres in financial year 2014, ranking it among the top 20 global dairy producers.
Mr Helou said combining the two into a globally competitive co-operative was the only way farmers could meaningfully benefit from the growing demand for dairy overseas.
He said suppliers needed to consider the future of the local industry when deciding on the takeover bid.
"What we are putting on the table is an offer for them to take a stake in every step in the value chain."
A Saputo spokesman said the Canadian group was " considering its options" in light of Murray Goulburn's announcement.
WCB told the market on Friday it had not been aware of Murray Goulburn's intentions to make an offer and was not yet in a position to respond.
Murray Goulburn has sought approval for the merger from the Australian Competition Tribunal, which means it could go ahead if it is proved to be in the public good.
The co-operative has entered into a new $350 million debt facility with National Australia Bank, ANZ and Westpac to finance the deal.
It said it believed the level of leverage, post any transaction, would be "appropriate" for a farmer-owned co-operative structure which is undergoing significant growth and investment.
Mr Helou said a combined co-operative would hope to address the decline in Australian dairy production.
He said a co-operative structure, like New Zealand dairy giant Fontera, was the best way to do this while maintaining benefits for farmers.
"Asia is at our doorstep and we are not really connecting there."
The move by Murray Goulburn comes just days after WCB formally rejected Bega's $370 million bid by releasing an independent expert's report labelling the offer as "inadequate and inferior" to Saputo's proposal. WCB had previously endorsed Saputo's offer, which values the 125-year-old Victorian dairy group at $390 million.
In linking with Saputo, WCB had set its sights on the potentially booming infant formula market in Asia, saying it would use its infrastructure and dairy brands to take advantage of expected strong demand for the baby product in the region.
Frequently Asked Questions about this Article…
Murray Goulburn's bid for Warrnambool Cheese and Butter (WCB) is significant because it represents a strategic move to create one of the largest Australian-owned food and beverage businesses. The bid also aims to position the company as a globally competitive co-operative, benefiting from the growing demand for dairy products overseas.
Murray Goulburn's offer of $7.50 cash per WCB share tops the $7 cash offer from Canada's Saputo and represents a 13% premium to the implied value of Bega Cheese Ltd's scrip-based offer. This makes it the most attractive bid in the three-way battle for WCB.
Murray Goulburn's co-operative structure is important because it allows farmers to take a stake in every step of the value chain, ensuring they benefit from the company's growth and investment. This structure is seen as a way to address the decline in Australian dairy production while maintaining benefits for farmers.
A merger between Murray Goulburn and WCB could create a company with annual revenues exceeding $3.2 billion and a combined milk supply of over 4 billion litres. This would rank the merged entity among the top 20 global dairy producers, enhancing its competitiveness in the international market.
Murray Goulburn is financing its bid for WCB through a new $350 million debt facility with National Australia Bank, ANZ, and Westpac. The company believes the level of leverage post-transaction will be appropriate for its farmer-owned co-operative structure.
Murray Goulburn faces challenges such as gaining approval from the Australian Competition Tribunal, which requires proving the merger is in the public good. Additionally, it must compete with other bids from Saputo and Bega Cheese Ltd, which have their own strategic advantages.
WCB previously endorsed Saputo's offer because it valued the 125-year-old Victorian dairy group at $390 million and aligned with WCB's strategy to capitalize on the booming infant formula market in Asia. Saputo's infrastructure and dairy brands were seen as advantageous for tapping into this growing demand.
According to Murray Goulburn, the future of the Australian dairy industry hinges on creating a globally competitive co-operative that can meet the growing demand for dairy products overseas. The company believes that a merger with WCB is a crucial step in achieving this goal and ensuring long-term benefits for Australian farmers.
Call 1300 880 160
Start a chat
Schedule a call
