SYDNEY (Reuters) — Australia said on Tuesday it would allow Saputo Inc. to bid for Warrnambool Cheese and Butter Factory Holdings Ltd., removing a key obstacle for the deal aimed at consolidating the country’s dairy industry as global demand surges.
Saputo, Canada’s largest dairy producer, hiked its bid for WCB by 14 percent to $420 million in October, trumping earlier approaches by major shareholders Bega Cheese Ltd. and Murray Goulburn Co-operative Co. Ltd.
“The future ownership of (WCB) is ultimately a matter for the shareholders but this decision provides certainty in relation to Saputo’s bid,” Australian treasurer Joe Hockey said in a statement announcing his unconditional approval.
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“Australia is open for business and we welcome foreign investment when it is not contrary to the national interest.”
WCB is being chased for its export connections to Asia, where demand for both for its basic dairy produce and its high-tech milk extracts is rising strongly.
Saputo’s bid has been unanimously recommended by the WCB board.
Bega said last week it was considering whether to sweeten its cash and share offer that kicked off the bidding war in September.
Industry heavyweights, including New Zealand’s Fonterra Co-Operative Group Ltd., the world’s largest diary exporter, and Japan’s Kirin Holding Co. Ltd., have taken stakes in Bega and WCB, respectively, with intent to influence the consolidation in the Australian dairy industry.
“I think there is a good chance that Murray Goulburn or Bega come back with a bid, which in turn could see Saputo come back with a knock-out bid,” said one equity analyst, who spoke on condition of anonymity.
Hockey is due to make another decision on a North American takeover play for an Australian agricultural company — Archer Daniels Midland Co.’s $3 billion bid for GrainCorp Ltd. — by mid-December.
That deal has spurred opposition from some growers and Hockey’s junior coalition partners in government, the rural-focused National Party, but is still expected to be approved.
“The GrainCorp deal is more sensitive. Saputo doesn’t change the dairy industry,” the equity analyst said. “I still think the ADM offer will still be approved.”
