UPDATED: Canadian dairy may need to up the ante to acquire Australian company

Montreal – Saputo Inc., one of Canada’s largest food processors, is stuck in a three-way bid for Warrnambool Cheese and Butter Factory, an Australian milk processor and one of the largest in that country.

Just last week a third company emerged with its own takeover bid for Warrnambool Cheese and Butter Factory. Saputo bid Cdn$378 million earlier in October.

The third company is Murray Goulburn, an Australian dairy cooperative, which announced a buyout offer at $420 million, reports Australia’s HeraldSun.com.au. Murray Goulburn’s offer beats Saputo’s offer, which Warnambool’s board had backed.

The News.com.au says Saputo had been interested in the Australian company for the last decade. And the company hopes this acquisition, if successful, will lead to other deals in the country.

In September, Warrnambool was the subject of another takeover offer by Bega Cheese Limited. Bega Cheese’s offer was $319 million, which had initially won unanimous backing from the Warrnambool board. Bega Cheese is based in the Bega Valley in Australia and says more than 60 million Bega branded products are sold throughout Australia each year.

The HeraldSun.com.au reports that Warrnambool’s board recommended shareholders accept Saputo’s offer instead, calling it a superior offer – unless a better offer comes along.

“Saputo has made strong commitments to Warrnambool Cheese and Butter suppliers, employees and the retention of Warrnambool Cheese and Butter’s corporate identity and brands,” the board said.

Now, reports the WinnipegFreePress.com, analyst Mark Petrie with CIBC World Markets says the offer my not be enough. Petrie also says he doesn’t believe the offer will go through as it stands now. For one thing, Bega Cheese is still keen and has an 18 per cent equity stake.

If Murray Goulburn’s offer is successful it would create one of the largest Australian owned food and beverage businesses and create a globally competitive dairy food company 100 per cent controlled by dairy farmers. The company says it plans to invite Warrnambool suppliers to join the cooperative, which it plans to rename Murray Goulburn Warrnambool, reports the HeraldSun.com.au.

Warrnambool operates two manufacturing sites in South West Victoria and South Australia and employs more than 420 people. It’s been producing dairy products for more than 120 years.

The company produces a range of dairy products for domestic and export markets. Its products include cheese, butter and butter blends, milk, cream and dairy ingredients. The company had revenues of Cdn$479 million in 2012.

The News.com.au reports that Saputo plans to invest in Warrnambool to boost its production and use the business to increase its presence in Asia.

Saputo also plans to retain the Warrnambool name and its brands including Sungold Milk and Great Ocean Road.

There are no plans to cut staff members and in fact Saputo plans to increase production at Warrnambool’s Allansford facility.

The News.com.au also reports that Saputo plans to develop new products under the Warrnambool name and use the business to introduce some of its own products to Australia.

Saputo’s takeover will need approval from Australia’s Foreign Investment Review Board, says News.com.au, and acceptance from the majority of Warrnambool’s shareholders.