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Ag deals find weak points in Aussie takeover rules

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Australia's takeover regulation, condemned in November for barring a foreign purchase of GrainCorp, was on Thursday criticised for undermining a domestic bidder, as the country's oldest dairy group was bought by Canada's Saputo.

Murray Goulburn, Australia's largest dairy good group, said that it had been prevented by red tape from competing "realistically" in the bidding battle for Warrnambool Cheese and Butter Factory.

While Saputo received approval in November, the month after making its offer, Murray Goulburn's – higher - offer remained tied up with a domestic anti-trust investigation by the Australian Competition Tribunal even until Thursday, when the co-operative conceded defeat in the bid battle.

'Unable to compete realistically'

"Murray Goulburn considers it a lost opportunity for the Australian dairy industry that Saputo received Foreign Investment Review Board approval in a significantly shorter timeframe than the process Murray Goulburn was required to follow," the Victoria-based co-operative said.

"From the point that Saputo was granted FIRB approval, the Murray Goulburn offer was not capable of being acted on by WCB shareholders in the same time period.

"Consequently, Murray Goulburn was not able to compete realistically on a level playing field with a competing international bidder for Warrnambool."

'Best bidder'

The comment strikes a chord with many investors, with one telling that the Australia's competition regulation "had prevented the best deal from being done.

"Murray Goulburn was best placed to create the most value from a takeover. Being a domestic bidder, it could release more synergies from crunching its operations together with Warrnambool's," the investor said.

"That is before any flag-waving considerations about creating a national champion."

The criticism contrasts with the attacks on Australia's government after it in November prevented US-based Archer Daniels Midland from buying GrainCorp, the Australian grain handler, saying that the "contentious" $3.1bn deal was "contrary to the national interest".

'Excellent financial outcome'

Murray Goulburn's comments came as it admitted defeat, again, in an attempt to buy Warrnambool, selling its 17.7% stake to Saputo, whose holding rose above 75%, triggering an increase to Aus$9.40 a share in its bid.

Even so, the offer remains below the Aus$9.50 a share bid by Murray Goulburn.

The co-operative will receive at least Aus$92.9m for the sale, creating a pre-tax gain of about Aus$51m, for what it termed an "excellent financial outcome".

Saputo's achievement of a 50% stake in Warrnambool earlier this week had left Murray Goulburn focusing on "an obligation to our shareholders to maximise the financial outcome and focus management time on growing a strong and globally-competitive co-operative", the group said.

Appetite for deals

Nonetheless, despite failing for the second time in four years in an attempt to buy Warrnambool, Murray Goulburn said that it had not given up its takeover ambitions.

"While the Australian dairy industry remains deeply fragmented, Murray Goulburn is committed to consolidation of the sector and will continue to pursue future consolidation opportunities as they arise," the co-operative said.

Gary Helou, the Murray Goulburn managing director, said that the group had a "vision to create a significant, Australian-owned, globally relevant dairy business.

"There is a significant opportunity for us to capture the global opportunity and deliver its upside to Australian farmers and their rural communities – ultimately the only way the industry will be able to arrest the decline in production we have experienced over the last 10 years."

United Dairy Power, Australia's largest privately-owned milk supplier, is also up for sale, and has trumped its preference for a domestic bidder, although Chinese suitor Bright Food Group is believed to be circling the company.


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