Australian dairy wars

While much focus has been centred on the Warrnambool Cheese and Butter Factory takeover saga, one rarely discussed player in the battle for its control may be quietly seeking bids of its own.

According to The Australian, Japan’s Kirin Holdings could be looking to offload the dairy division of its National Foods business.

The news follows a recent report that Italy’s Parmalat was circling Western Australian-based Harvey Fresh.

While there may be merit to the speculation, there must be doubts about the likelihood for the former to go ahead given Kirin has been adamant on the worth of the food and beverage sector.

It has steadily bought a major position in Australia through purchases of National Foods, Dairy Farmers and Lion Nathan. It would seem odd to make a partial exit now, especially given the rumours suggest a sale of the dairy assets would only recoup $1 billion, which is well below the amount paid for them.

In 2007, Kirin paid $2.5 billion for dairy and juice producer National Foods and the next year it bought Dairy Farmers for $910 million. While not all of National Foods – which owns the Pura Milk brand – is dairy, it is believed Kirin’s total dairy purchases would amount to around $2.5 billion.

In October, Kirin threw itself into the fight for WCB by buying a 10 per cent stake in the takeover target, which was aimed at protecting its relationship with WCB. It remains unclear which party Kirin would like to win out in the battle, with Canada’s Saputo considered its least preferred bidder.

According to The Australian, however, that view could quickly turn around if Saputo made a bid for its dairy assets. The other likely candidate to pitch a bid for Kirin’s dairy assets is New Zealand’s Fonterra, which Kirin reportedly courted in regard to the assets a few months ago.

Meanwhile, Murray Goulburn Co-operative has received a boost in its bid for WCB, with a key Victorian industry body throwing its weight behind the proposal, according to The Australian.

The United Dairy Farmers of Victoria believe a “national champion” is required to get the best out of the sector and Murray Goulburn fits that bill.

“We need enough scale in Australian hands to take advantage of those markets in the region that are opening up for us,” UDV president Kerry Callow told The Australian.

In the meantime, Saputo and Bega Cheese, which have both received regulatory approval for a WCB takeover, are likely to extend their bid deadlines soon as they are due to expire this week. At the moment Saputo is handcuffed as the Takeovers Panel has ruled it cannot take acceptances for its offer while an investigation is carried out to see if it misled WCB shareholders.

Source: Business Spectator

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