Cash cow: Why Saputo, Murray Goulburn, Bega and Lion are fighting over Warrnambool
IT'S a company with an almost unpronouncable name you had never heard of until four months ago. But there's been a pitched takeover battle for control of 125-year old Australian company Warrnambool Cheese and Butter (WCB) with suitors wooing the dairy producer with wads of cash.
Forget about mining, it's all about milk. Now is the time to trade in those magic beans for some cows.
WCB's shareholders are raking it in while major companies climb over each other to get a piece of the business. Its share price has more than doubled from $4.51 to $9.40 in that short time.
The latest salvo from dairy giant Saputo yesterday has put the momentum firmly behind the Canadian company, leaving rival Victorian farmers' co-op Murray Goulburn in a tenuous position.
Fellow Aussie producer Bega, which started the bidding war in September but dropped out in December, sold its 18.8 per cent share of WCB to Saputo, which gives the Canadian firm more than 45 per cent share in the business.
Saputo is offering more than $500 million for WCB. Japanese-controlled Lion also threw its hat in the ring at one point, paying more than $50 million for a 10 per cent stake.
But why are the rivers of gold flowing with milk? Like so many things, it has to do with China.
China is the world's largest importer of dairy products with demand set to skyrocket to meet demands from its billion-plus consumers increasingly adopting a 'Westernised' diet. China's reliance on imported dairy products has grown between 20 and 30 per cent in the past two years, according to a Rabobank report, and is tipped to meet 20 per cent of its milk demand from overseas sources.
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If the rivers of gold are flowing with milk, why would WCB sell it off? Wouldn't they be better off raking the profits in themselves?
