The main rival to Saputo Inc.’s friendly offer for an Australian dairy processor says the bidding war could last a long time.
Meanwhile, Montreal-based Saputo faces mounting concerns in Australia over the possibility of a foreign takeover of Warrnambool Cheese and Butter Factory Co. Holdings Ltd. as well as reduced competition in the dairy sector.
Murray Gouldburn Co-operative Co. Ltd. of Australia – whose own bid for Warrnambool was trumped by Saputo’s sweetened offer Thursday – said on Friday the Saputo proposal “continues to be subject to substantial conditionality.”
It is “reasonable and in the national interest” that the country’s Foreign Investment Review Board fully consider the “public benefits” of Murray Gouldburn’s proposed acquisition before Saputo’s application is resolved, the company said in a news release.
“[Murray Gouldburn] believes that resolution of the future ownership of [Warrnambool] will be a long process and that [Warrnambool] shareholders should not act prematurely in relation to giving up control of their shareholdings.”
Murray Gouldburn says it remains committed to acquiring Warrnambool but did not say if it intends to top Saputo’s offer.
Montreal-based Saputo said late Thursday that it is hiking its all-cash $378-million offer for Warrnambool by 14 per cent to $430-million.
The revised, $8 (Australian), proposal trumps the $7.50-per-share bid from Murray Goulburn Co-operative Co. Ltd. as well as a separate offer from Bega Cheese Ltd.
Both rival bidders are from Australia and Saputo’s attempts at taking control of Warrnambool have triggered a nationalist backlash in Australia’s insular dairy sector.
“It’s in Australia’s national interest that we maintain national control,” Gary Helou, managing director of Murray Goulburn, said recently in a television interview with an Australian news channel.
Mr. Helou and others have said it’s crucial that Australia build its own national champion through consolidation rather than sell out to foreign companies, especially given the significant growth opportunities in Asia.
Consumers in Asian countries are showing a growing appetite for milk, cheese and other dairy products.
Saputo president and chief executive officer Lino Saputo Jr. has been seeking entry into the Australian market for years as the company expands outward from the more mature North American market.
Mr. Saputo tried to reassure Warrnambool shareholders that a takeover by Saputo would not lessen competition.
“We know how important competition is for milk producers. Saputo does not currently have a business in Australia, so Saputo’s arrival in Australia will not reduce competition,” he said in a statement Thursday.
“Instead, we will ensure [Warrnambool] is well-financed and remains a vibrant competitor.”
Warrnambool’s board has endorsed Saputo’s higher offer.
Saputo must get approval from Australia’s Foreign Investment Review Board for the deal to go through.
At Warrnambool’s annual meeting Thursday, chairman Terry Richardson said the fight for control of Warrnambool could end up being decided by independent farmers who hold between 30 and 40 per cent of the company’s shares.
One dairy farmer who is both a shareholder and supplier to Warrnambool, Wim Kampschore, told the Australian Financial Review he’s worried Saputo will funnel all the profits back to Canada if it wins the takeover battle.
“I feel we have to take a stand now and protect our industry,” he is quoted as saying. “We might be the food bowl to Asia but all the profits will go to Canada.”
It is not clear at this point if either or both rival bidders from Australian will counter Saputo’s richer bid.
Desjardins Securities analyst Keith Howlett said in a research note Friday that Warrnambool’s board prefers Saputo’s proposal not only because it tops the rival bids but also because “Saputo’s operational plans are to aggressively expand the business. Saputo has a track record that validates its ability to successfully do so, based on its success in Canada, the U.S. and Argentina.”
And he added that milk producers who supply Warrnambool “should find assurance that Saputo is seeking vigorous growth, not acquisition bragging rights, nor reasonably assured in-market synergies. Saputo has the financial strength to make the capital investments necessary to pursue growth in higher value-added products.”
For Saputo, Canada’s largest dairy processor and the second biggest in North America, the Warrnambool acquisition is not a major or costly undertaking. Both Bega and Murray Goulburn are much smaller than Saputo.