Third Warrnambool bid highlights hot demand for Australasian dairy

Reuters

* Murray Goulburn plans A$7.50/shr bid

* Offer would top agreed Saputo offer, earlier Bega bid

* Warrnambool shares jump to record high

By Jackie Range

SYDNEY, Oct 18 (Reuters) - Warrnambool Cheese and ButterFactory Company Holdings Ltd's second-largestshareholder launched a A$420 million ($405 million) bid for theAustralian dairy company, trumping two previous offers andfanning speculation it could command an even higher price.

The battle for Warrnambool heated up on the same day asChina's Shanghai Pengxin made an offer for more dairy farms inNew Zealand, underscoring robust demand for Australasian dairyand farm assets as companies ramp up their exposure to Asia'sgrowing appetite for milk, cheese and other food products.

Murray Goulburn Co-operative Co Ltd, which owns about 17percent of Warrnambool, is offering A$7.50 per share in cash. That is more than a A$7 per share bid from Canada's Saputo Inc which in turn had bested a A$5.78 per share offer fromAustralia's Bega Cheese Ltd in September.

Warrnambool said in a statement that its directors wouldmeet shortly to consider the Murray Goulburn offer and that ithad been unaware of the cooperative's intentions until Friday.Its shares hit a record high of A$7.98 and closed up 6 percentat A$7.89. They have gained 75 percent since the Bega offer.

"The question now is what Saputo does from here," said MarkTopy, senior industrials analyst at Canaccord Genuity. "Bega isan outside chance to bid higher but Saputo, they're a bigglobal company, they've got the pockets to bid higher."

A Saputo spokeswoman said the company was considering itsoptions after the Murray Goulburn offer. Bega Executive ChairmanBarry Irvin told Reuters that the company, which isWarrnambool's largest shareholder with a stake of almost 18percent, would consider its position carefully.

"We are reserving the right to adapt the bid but we believethat we'll do our thinking and deliberately consider ourposition and that's not changed by a new offer coming on thetable today," Irvin said in a telephone interview.

A banking source said Bega has the capacity to increase itsbid if it so chooses but the question is whether it would wantto.

"The prices are in nosebleed territory by anybody'sstandards... It's getting pretty close to a 100 percent premiumin a market where typical takeover premiums are 30 percent,"said the source, who declined to be identified as the process isconfidential.

DAIRY FEVER

Australian dairy farmers have been grappling with asupermarket price war that slashed domestic wholesale prices, astrong Australian dollar that crimped exports and a drought thatsent cattle feed costs soaring.

Murray Goulburn said its proposal would create one of thebiggest Australian owned food and beverage firms, forecastingannual revenue of the combined businesses at more than A$3.2billion. It has secured financing for the deal, it added.

"This is an historic opportunity for Murray Goulburn and WCBsuppliers and shareholders to create a larger scale, globallycompetitive Australian dairy food company owned and controlledby Australian dairy farmers," Murray Goulburn Chairman PhilipTracy said in a statement.

It also agreed to match a Saputo proposal on the payment ofa fully-franked special dividend. Rivkin Securities estimatedthat would take the total worth of offer to A$8.00 a share.

In New Zealand, Shanghai Pengxin was poised to complete itssecond acquisition of dairy farms partly owned by Synlait FarmsLtd in a transaction that values the business at NZ$85.7 million($73 million).

There was some speculation in the market that Bega itselfcould become a target but Executive Chairman Irvin dismissedthat likelihood.

"I think there's feverish speculation going on abouteverything in the dairy industry at the moment Bega Cheese isnot for sale, we have shareholder caps and such things in placeto ensure that that is a reasonably challenging circumstance foranybody that wishes to make a bid on Bega," he said.

CIMB Corporate Finance (Australia) Limited is advisingWarrnambool and Kidder Williams Limited is advising Bega. Lazardis advising Murray Goulburn while Saputo is being advised byRabobank and Rothschild.

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