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Third Warrnambool bid highlights hot demand for Australasian dairy

* 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 Butter Factory Company Holdings Ltd's second-largest shareholder launched a A$420 million ($405 million) bid for the Australian dairy company, trumping two previous offers and fanning speculation it could command an even higher price.

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

Murray Goulburn Co-operative Co Ltd, which owns about 17 percent 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 from Australia's Bega Cheese Ltd in September.

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

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

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

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

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

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


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

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

"This is an historic opportunity for Murray Goulburn and WCB suppliers and shareholders to create a larger scale, globally competitive Australian dairy food company owned and controlled by Australian dairy farmers," Murray Goulburn Chairman Philip Tracy said in a statement.

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

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

There was some speculation in the market that Bega itself could become a target but Executive Chairman Irvin dismissed that likelihood.

"I think there's feverish speculation going on about everything in the dairy industry at the moment Bega Cheese is not for sale, we have shareholder caps and such things in place to ensure that that is a reasonably challenging circumstance for anybody that wishes to make a bid on Bega," he said.

CIMB Corporate Finance (Australia) Limited is advising Warrnambool and Kidder Williams Limited is advising Bega. Lazard is advising Murray Goulburn while Saputo is being advised by Rabobank and Rothschild.