Murray Goulburn could up the ante in bidding war
The Murray Goulburn Co-operative says it is not yet out of the bidding war for the Victorian dairy business Warrnambool Cheese and Butter.
Murray Goulburn managing director Gary Helou increased the co-op's bid this week, and says he may not have finished yet.
On Friday, share trading in Warrnambool Cheese and Butter (WCB) was halted at the company's request.
WCB requested the halt until next Tuesday as it negotiated a revised offer from Canadian company Saputo, of $9 cash per share.
In a matter of weeks, WCB has gone from a relatively obscure dairy business to one of the hottest properties on the ASX, thanks to the frenetic three-way bidding war between Murray Goulburn, Bega Cheese and Saputo.
Murray Goulburn announced earlier in the week that it is offering $9 per share for the company, while and Bega Cheese increased its offer on Thursday to the equivalent of $8.87 a share.
Murray Goulburn managing director Gary Helou spoke to Inside Business just after Bega launched its counter cash and share offer and before Saputo's revised offer.
Mr Helou has not yet said whether $9 is Murray Goulburn's final offer for WCB.
"We've said we have a good price offer," Mr Helou said.
"We always reserve the right to review and react to obviously an ever changing dynamic," he said.
Dairy demand from Asia
Mr Helou said WCB was attractive because of export demand from Asia.
"What we're seeing is the implied value, the strategic value of this sector, agribusiness but especially the dairy sector where we're seeing very high growth rates in Asia but a real gap between supply and demand," he said.
"The markets in Asia are growing at around 7 per cent to 8 per cent per annum, this is in value terms and the capacity to supply that market is no better than 2 or 3 per cent.
"It's been zero last year, and we expect this year to be about 2 per cent so there's a widening gap between supply and demand.
"We're seeing also an inability of the Asian economies to produce enough dairy product to fulfil that demand, therefore we see that gap widening into the future.
"The Chinese dairy import market 10 years ago was about valued at $US400 million, today it's 10 times that at about $4 billion, this year it's expected to be $5 billion.
"So that's a 10 time increase over the last 10 years."
Mr Helou expects that demand to grow at a rate of 10 per cent each year, and to double in the next decade.
"Gearing, if we take hold of Warrnambool, would be up to 57 per cent and $9 a share bid," he said.
"We are comfortable with that, our bankers are comfortable with that, equivalent cooperatives during growth and investment phase got up to 65 per cent.
"Warrnambool Cheese and Butter is an interesting company because of where they are, it's a very fertile part of Victoria and it's a proven producer of quality dairy.
"Warrnambool has a good pool of milk, about 800 million litres which is valuable and they have a good infrastructure, a good plant that produces cheese and powders so now the combination of those two things makes it a very interesting unit.
"When you combine it with a bigger unit like Murray Goulburn you are going to have a very big economic unit that has real export orientation and real capacity to take advantage of this incredible growth that we are seeing in Asia," Mr Helou said.
Source: ABC News, 17 November 2013
