New Zealand dairy giant Fonterra has indirectly joined the scramble for Warrnambool Cheese & Butter with the purchase of shares in Bega Cheese.
Fonterra has so far purchased 9.3 million shares at $4.95 per share for a total cost of $46 million and it is said to be seeking a 10 per cent stake.
Fonterra CEO Theo Spierings said Australia was an important market for Fonterra, and it was committed to growing its already strong presence.
“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,” he said.
The move follows closely on the heels of Bega gaining Australian Competition & Consumer Commission approval for a WCB takeover.
ACCC Chairman Rod Sims said the regulator had concluded that a merged Bega and WCB would continue to be constrained by other dairy manufacturers that they compete more closely with in the acquisition of raw milk, including Murray Goulburn and Fonterra.
Bega is the first of three parties vying for WCB - which include Murray Goulburn (MG) and Canadian company Saputo - to gain regulatory approval.
The WCB board, however, has backed the offer of Saputo, which has yet to gain Foreign Investment Review Board approval. There are also big question marks over whether MG would gain the ACCC's approval, given the regional crossover the company has with WCB.
Shares in Bega have soared since it announced its takeover intentions, boosting the value of its takeover offer.
Fonterra and Bega have close commercial ties in Australia: Fonterra markets the Bega brand in Australia, and Bega has a cheese supply agreement with Fonterra which sees Fonterra supply cheese in bulk and Bega process it for retail through its cut and wrap facility in Bega, southern NSW.
“We have a longstanding partnership with Bega, and we look forward to continuing to build on that relationship into the future,” said Judith Swales, managing director, Fonterra Australia.
Bega and MG between them hold about 35 per cent of WCB shares, and earlier this week, Lion bought a 10 per cent stake in WCB.
Industry commentators say the bidding war augers well for the role of Australia's dairy industry in meeting growing demand for dairy products in Asia.
