In Murray Goulburn’s case it was a war of words as Government regulations stopped it from even leaving the starting blocks. It could do nothing but watch as Saputo grew its stockpile of WCBF shares by the day, while it was forced to take its case to the Australian Competition Tribunal and hope for approval to buy a competitor in its bid to grow its milk supply and future prospects.
Victoria produces about two-thirds of the country’s raw milk and the state’s farm lobby group, United Dairyfarmers of Victoria (UDV), had been vocal in its support of Murray Goulburn buying WCB.
UDV believes the local processing industry is too fragmented with over a dozen processors in the country, and too many focussed on the domestic market. It looks longingly at Fonterra with its production efficiencies. It stated the case for co-operatives returning all profits to the farmers. It saw this as a chance for rationalisation in the industry by the country’s largest co-op.
That ship has sailed as the majority of WCB shareholders decided to throw their lot in with Saputo. Many farmers bought their shares for less than a dollar each and sold them for $9.40. They held them through the lean times when selling shares for $2.50 to buy fodder would have been sorely tempting.
Among the biggest financial winners in this sense were Bega Cheese (which started the bidding frenzy with its initial offer of cash and shares in September) and Murray Goulburn. Once withdrawing from the race, Bega sold its 18.8% shareholding, which triggered a rush of sales by others.
Once Saputo had achieved its initial goal of a 50% stake in WCBF, Murray Goulburn realised the race had been won and sold its 17.7% stake in the company.
Both Bega and MG will now reap about $90 million, which leads to the question, where to from here for the Australian industry?
MG managing director Gary Helou fired the first salvo by saying Saputo may have been successful in buying “stainless steel”, but that MG would target its farmer-suppliers.
MG had planned to borrow the $500 million it would have taken to buy WCB. Now it need borrow nothing, and has reaped $90m cash.
The co-op also revealed plans last year to implement a trading amongst farmers (TAF) scheme to raise $500m to grow the business. Helou set the ambitious target of having this scheme running by July 1 – even though it took five years in New Zealand.
Farmers are nervous about this change, and may ask why not instead raise money, as previously planned, to buy WCB?
For many and varied reasons, WCB suppliers chose to throw their lot in with an unknown quantity in Saputo. This company’s chief executive, Lino Saputo Jnr, is impossibly handsome, that’s beyond doubt, but how will he treat Australian farmers?
And having paid over their planned initial price for WCB, will Sapauto have the funds to launch its proposed push into Asia? That was the main reason they pursued the company with such vigour.
Essentially, they have paid half a billion dollars for some processing facilities and 10% of Australia’s milk production.
Murray Goulburn, in contrast, has 33% of the country’s milk supply tied up and is aggressively searching for more.
Saputo may have won the battle, but, to quote an often-heard analogy, the war is far from over.
