Australian competition officials will not block a Bega takeover of WCB

Australian competition officials will not block a Bega takeover of WCB

Fonterra has snapped up a 6% stake in Australian firm Bega Cheese, adding a fresh twist to the M&A speculation swirling around the country's dairy sector.

Bega Cheese is one of three dairy processors that have tabled full takeover bids for Australian firm Warrnambool Cheese and Butter Factory (WCB).

The New Zealand dairy giant bought the stake in Bega for A$46m and said it was "important" it took part in the consolidation of Australia's dairy sector.

"There has recently been a lot of consolidation activity in the Australian dairy industry. It is important that Fonterra participates and we have confidence in Bega and the strategy it is pursuing," Fonterra CEO Theo Spierings said. Fonterra sells Bega Cheese's cheese brands in Australia via a licencing deal.

When asked by just-food if it could look to further increase its stake in Bega Cheese, Fonterra declined to comment further.

Bega Cheese's attempt to buy WCB received a boost yesterday (31 October) when Australia's competition watchdog said it would not oppose the takeover if the company's offer was accepted.

However, Bega Cheese's cash-and-stock bid faces competition from all-cash offers from Murray Goulburn, another Australian dairy company, and Canadian dairy giant Saputo, which has made the highest bid for WCB.

According to a report in Australia yesterday, the head of the Australian competition watchdog said a takeover of WCB by Murray Goulburn could be a "concern".

"The key issue is the purchase of milk off farmers; are there enough people wanting to buy their milk," Rod Sims, chairman of the Australian Competition and Consumer Commission, told The Australian newspaper.

"Basically Fonterra, Murray Goulburn and Warrnambool buy about one-third of the milk and Bega is quite a small player in that market, so Bega wasn't such an issue. There is a bigger issue with Murray Goulburn."

Murray Goulburn's bid for WCB is conditional on no objection by the ACCC or a granting of authorisation by the Australian Competition Tribunal. Three years ago, Murray Goulburn withdrew an attempt to buy WCB amid concern from the ACCC. When contacted by just-food, it refused to be drawn on the reported comments from Sims.

Meanwhile, another Australian dairy processor, Lion, acquired a 9.99% stake in WCB this week. The move, however, has been seen as a strategic move to give Lion, which has some of its cheese made by WCB, some leverage if its partner gets new owners.

Saputo chief executive Lino Saputo Jnr has been in Australia this week to meet WCB shareholders and farmers to discuss his company's offer, which has been recommended by the Australian firm's board.

Talking to ABC radio, Mr Saputo said: "There's a lot of things in this process here that we didn't see coming, to be honest with you, and we're adjusting on a day to day basis.

"I don't feel any threat at all from the Lion bid and Murray Goulburn bid or the Bega bid. I think our bid is very compelling, we're looking at 50% control and I think that is still very possible."

Bega Cheese has expressed doubts about whether the bid from Saputo will succeed, given it needs to be accepted by a majority of WCB shareholders.

When Saputo announced its second bid last week, it stated one of the conditions was "a minimum tender condition of greater than 50%".

Bega Cheese told just-food today its board will meet next week to consider its bid.

Click here for just-food's full coverage of the developments in this evolving story.