Monday, November 25, 2013

The battle for Warrnambool Cheese and Butter

Vanguard December 2013 p. 4
Duncan B.

Warrnambool Cheese and Butter has been in existence since 1888. This old-established company whose products include well-known brands such as Cracker Barrel and Coon, is currently the subject of a three-way take-over battle

Two of the three contenders are Australian owned. Bega Cheese and farmer-owned co-operative Murray Goulburn are taking on the third contender, Canadian food giant Saputo, which is one of the ten largest dairy processors in the world.

Saputo is seeking a shareholding of at least 50.1% in WCB. The situation is complicated for Saputo by the fact that its rivals are already shareholders in WCB.

Bega has an 18% share in WCB. Murray Goulburn owns 17% of WCB, and Lion (owned by Japanese firm Kirin) owns 10% of WCB. Further to this, New Zealand dairy giant Fonterra recently bought a 6% share in Bega, and is trying to bump this up to 10%.

The stakes are high in this take-over battle. WCB produces basic dairy products, but it is also one of only two Australian dairy companies that produce milk extracts.

These are the main elements in products such as baby formulas and bone supplements. Milk extracts are part of the nutraceutical market which is set to be worth $80 billion in the Asia-Pacific region by 2017. It is easy to see why the dairy giants are all after WCB.

Dairy farmers are divided in their opinions about the proposed take-over of WCB. Some support Saputo, but many want to see WCB remain in Australian hands, a desire shared by all Vanguard readers. Many farmers and dairy industry leaders are advocating the strengthening of farmer-run co-operatives.

Treasurer Joe Hockey has announced that the Saputo bid for WCB can go ahead without any conditions imposed by the Government. This is in contrast to Murray Goulburn which still has to convince the ACCC that a take-over of WCB by Murray Goulburn would not be anti-competitive.

Despite this, Murray Goulburn announced in mid-November a fresh offer which is higher than Saputo’s offer. Saputo immediately followed MG’s offer with a higher offer.

Who will be victorious in this struggle for Warrnambool Cheese and Butter, and what will be the final outcome for all of the players in this dairy industry drama remains to be seen.

More bad news in food processing industry

Coming on top of the job losses at Simplot and McCain is the news that Golden Circle (owned by Heinz) is to cut 123 jobs from its Victorian juice plant in Mill Park, with the work going to the company’s plant in Brisbane. The company claimed that the plant is too costly to continue to operate.

Deadline looms for GrainCorp takeover decision

Treasurer Joe Hockey has until December 17 to make a decision whether or not to allow the take-over of grain handler GrainCorp by US grain giant Archer Daniel Midland. The National Party is opposed to the take-over, as are many country-based Liberal MPs. Opinion among grain growers is divided.

Following Hockey’s approval of Saputo’s bid for Warrnambool Cheese and Butter, Vanguard readers will be most surprised if he puts a stop to ADM’s take-over bid for GrainCorp. If successful, a major Australian grain handling company would pass into foreign hands along with control of grain-handling infrastructure and grain export ports on the east coast of Australia.

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