Australian dairy takeover war heats up with fresh Bega offer

Reuters

* Bega raises bid to 1.5 shares and A$2 per WCB shr

* Bid values WCB below Murray Goulburn's $470 mln offer

* Lack of conditions gives Bega a head-start- analyst

* Canada's Saputo waits in wings (Adds comments from Warrnambool, links to graphic, factbox)

SYDNEY, Nov 14 (Reuters) - The hotly contested takeoverbattle for Australia's oldest dairy company got even hotter asits largest shareholder Bega Cheese Ltd raised its bidto $461 million and said it will not attach conditions to itsoffer like other suitors.

Bega and Murray Goulburn Co-operative Co Ltd, the biggestshareholders in Warrnambool Cheese and Butter Factory CoHoldings Ltd (WCB), are locked in a three-way tusslewith Canada's Saputo Inc for the 125-year-old dairycompany.

WCB is being chased for its export connections to Asia,where demand for both for its basic dairy produce and high-techmilk extracts is surging.

"We needed to give the shareholders of Warrnambool Cheeseand Butter a live option... the ability to accept an offer,"Bega Chairman Barry Irvin said in a telephone interview onThursday after the company announced its latest offer.

Bega raised its offer to 1.5 of its shares and A$2 cash foreach WCB share from its initial offer of 1.2 shares and A$2 cashin September. At Wednesday's closing price, the offer is worthA$8.87 per share, or around A$496 million ($461 million).

Warrnambool advised shareholders not to take any action onthe latest offer.

While the offer falls just short of the latest A$9 per sharecash offer from Murray Goulburn, analysts said Bega could notyet be ruled out of the running.

"At first investors might see this latest offer from(Bega)as insignificant," said Shannon Rivkin, director at RivkinSecurities in Sydney.

"However, as it is unconditional, this bid presents thefirst opportunity where an investor can accept a complete offerwith no conditions pending, albeit a somewhat floating offergiven it is part scrip," Rivkin said.

Bega chose to waive a number of conditions it had imposed onits previous offer in September, such as on the conduct of theWarrnambool business until the bid process was completed, Irvintold Reuters.

REGULATORY HURDLES

Bega is also more advanced in meeting outside conditions,compared to Murray Goulburn. Bega has already got approval fromAustralian competition regulators for its initial bid.

Murray Goulburn's bid is still conditional on receivingapproval from the regulators and getting more than 50 percent ofacceptances. Murray Goulburn owns 17.26 percent of WCB.

"If you are a Warrnambool shareholder...you've got a A$9 bidfrom MG (Murray Goulburn), but can you actually accept it? Theanswer is no," said a banking source, declining to be identifiedbecause the process is confidential.

Saputo, Canada's largest dairy producer, has long beentouted as the likely eventual winner, given its formerly top bidof $420 million has been approved by regulators, although italso had a minimum acceptances required of more than 50 percentof Warrnambool shares. It is also seen as having greaterfinancial firepower to compete than other players in the deal.

Industry heavyweights, including New Zealand's FonterraCo-Operative Group Ltd, the world's largest dairyexporter, and Japan's Kirin Holding Co Ltd, have takenstakes in Bega and WCB, respectively, with intent to influencethe consolidation in the Australian dairy industry.

Bega, which owns around 18 percent of WCB, said it would notbe increasing its bid.

WCB shares, which have more than doubled since Bega'sinitial approach in September, were down 0.3 percent at A$9.07on Thursday.

The two-month long takeover battle has turned WCB into theworld's most expensive dairy company on a price-to-earningsbasis. It trades at 38.3 times 12 months trailing P/E, accordingto Thomson Reuters data.

Bega shares were 2.6 percent lower at A$4.46, but have morethan doubled in the past year.

Murray Goulburn was not immediately available to comment. ($1 = 1.0755 Australian dollars) (Reporting by Lincoln Feast and Jackie Range; Editing by RyanWoo)

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