Updated Nov. 13, 2013 12:20 p.m. ET
SYDNEY—A three-way battle for control of one of Australia’s biggest dairy companies became even hotter Wednesday, reflecting the promise China holds for food exporters.
Murray-Goulburn Co-operative Co., Australia’s biggest dairy producer, sweetened its offer for Warrnambool Cheese & Butter Factory Co. WCB.AU +6.56% Warrnambool Cheese & Butter Factory Co. Holdings Ltd. Australia: Sydney $ 9.10 +0.56 +6.56% Nov. 13, 2013 4:10 pm Volume : 1.34M P/E Ratio 66.50 Market Cap $ 477.98 Million Dividend Yield 2.42% Rev. per Employee N/A 11/13/13 Dairy-Takeover Fight Intensifi… 11/13/13 Canada Stocks to Watch: Loblaw… 11/12/13 Canada Stocks to Watch: Shoppe… More quote details and news » WCB.AU in Your Value Your Change Short position to nine Australian dollars (US$ 8.37) a share, valuing its local rival at A$ 503.7 million.
The offer trumps competing bids of A$ 8 and A$ 7.50, respectively, from Saputo Inc. SAP.T -0.43% Saputo Inc. Canada: Toronto $ 48.73 -0.21 -0.43% Nov. 13, 2013 12:05 pm Volume : 80,917 P/E Ratio 19.11 Market Cap $ 9.50 Billion Dividend Yield 1.89% Rev. per Employee $ 688,152 11/13/13 Dairy-Takeover Fight Intensifi… 11/13/13 Canada Stocks to Watch: Loblaw… 11/13/13 What WSJ Canada Is Reading Wed… More quote details and news » SAP.T in Your Value Your Change Short position of Canada and Bega Cheese Ltd. BGA.AU +5.05% Bega Cheese Ltd. Australia: Sydney $ 4.58 +0.22 +5.05% Nov. 13, 2013 4:10 pm Volume : 343,287 P/E Ratio 27.40 Market Cap $ 662.14 Million Dividend Yield 1.75% Rev. per Employee N/A 11/13/13 Dairy-Takeover Fight Intensifi… 10/29/13 Kirin Throws Down Gauntlet to … 10/02/13 RBS Morgans Says Buy Warrnambo… More quote details and news » BGA.AU in Your Value Your Change Short position of Australia, raising the stakes in what has becoming one of the fiercest takeover fights in recent Australian corporate history.
Australian dairy producers such as Murray-Goulburn are trying to build scale to compete more effectively with New Zealand dairy company Fonterra Co-Operative Group Ltd. FCG.NZ -1.04% Fonterra Co-Operative Group Ltd. New Zealand: NZX $ 6.64 -0.07 -1.04% Nov. 13, 2013 4:27 pm Volume : 100,748 P/E Ratio 14.77 Market Cap $ 11.12 Billion Dividend Yield 4.82% Rev. per Employee N/A 11/13/13 Dairy-Takeover Fight Intensifi… 11/06/13 Fonterra Swallows Australian Y… 10/02/13 Fonterra, Danone Enter Compens… More quote details and news » FCG.NZ in Your Value Your Change Short position in the race to feed Asia’s rapidly expanding middle classes.
Many Asians are adopting more-Western diets, creating opportunities for producers of dairy, wheat and other foods produced in agricultural powerhouses Australia and New Zealand.
The tussle for Warrnambool comes at a tough time for Fonterra, which was put on the defensive this year by a food-safety scare that prompted China to ban some of its products. Murray-Goulburn’s efforts, however, could be thwarted by Australia’s competition regulator, which will likely be concerned that buying Warrnambool will give Murray-Goulburn too much pricing power in the domestic market.
It would be “tragic” if the Australian Competition and Consumer Commission blocked the creation of the more “relevant, regional-scaled and efficient” business that would result from the takeover, Murray-Goulburn Chief Executive Gary Helou said Wednesday.
Rival bidders might yet challenge Murray-Goulburn. Bega said last week that it is considering another offer and Saputo has deep-enough pockets to stay in the fight.
“We wouldn’t be surprised to see Saputo come out and beat Murray-Goulburn’s revised offer,” said Belinda Moore, a Brisbane-based senior analyst at Morgans Financial.
Ms. Moore said Murray-Goulburn’s offer, which has an implied value of 11.5 times the company’s anticipated operating earnings for the year through June, including debt, is “well in excess of other dairy transactions” globally. Still, she said substantial savings from operating costs could be achieved if the two businesses were combined.
“Once Warrnambool is taken over, we wouldn’t be surprised to see corporate interest in Bega emerge,” Ms. Moore said.
Australia’s food sector has experienced a wave of consolidation in recent years, including Archer Daniels Midland Co. ADM +1.41% Archer Daniels Midland Co. U.S.: NYSE $ 40.99 +0.57 +1.41% Nov. 13, 2013 12:22 pm Volume (Delayed 15m) : 1.93M P/E Ratio N/A Market Cap $ 26.60 Billion Dividend Yield 1.86% Rev. per Employee $ 2,938,130 11/06/13 ADM Completes Internal FCPA Pr… 11/06/13 ADM Moves to Damp GrainCorp Bi… 10/29/13 Morning MoneyBeat: Bulls Juice… More quote details and news » ADM in Your Value Your Change Short position ‘s A$ 3.4 billion takeover of grain handler GrainCorp Ltd. GNC.AU 0.00% GrainCorp Ltd. Australia: Sydney $ 12.20 0.00 0.00% Nov. 13, 2013 4:10 pm Volume : 613,938 P/E Ratio 16.48 Market Cap $ 2.79 Billion Dividend Yield 3.28% Rev. per Employee N/A 11/06/13 ADM Moves to Damp GrainCorp Bi… 10/04/13 Australia to Decide on ADM’s $ … More quote details and news » GNC.AU in Your Value Your Change Short position and Bright Food Group Co.’s purchase of a controlling stake in dairy and bread company Manassen Foods Australia Pty. in 2011. ADM is based in the U.S., while Bright Food Group is based in China.
In Australia, food producers are under pressure from a local currency that, though having weakened in recent months, is still strong enough to crimp offshore revenue. Their margins also have been squeezed by rising labor costs and steep discounting by the country’s two biggest supermarkets amid a softer domestic economy.
A fourth competitor in the Warrnambool saga, Kirin Holdings Co. 2503.TO -0.07% Kirin Holdings Co. Ltd. Japan: Tokyo ¥1489 -1 -0.07% Nov. 13, 2013 3:00 pm Volume : 3.29M P/E Ratio 12.42 Market Cap ¥1437.85 Billion Dividend Yield 2.42% Rev. per Employee ¥54,736,200 11/13/13 Dairy-Takeover Fight Intensifi… 10/29/13 Canada Stocks to Watch: Sears … 10/29/13 Kirin Throws Down Gauntlet to … More quote details and news » 2503.TO in Your Value Your Change Short position of Japan, entered the fray last month by taking a 10% stake in the company, which produces Kirin’s flagship cheese brands in Australia.
A person familiar with Kirin’s strategy said at the time that the company didn’t plan to make an offer for control of Warrnambool, but wanted enough influence to protect its supply arrangements with the company.