Trade buyers line up for Dairy Farmers
MELBOURNE (Reuters) - Australian milk and cheese producer Dairy Farmers, which put itself up for sale last month, could run into competition concerns because some widely touted trade buyers have overlapping dairy interests.
Dairy Farmers says it has had substantial interest in a deal that could be worth up to A$1.0 billion ($930 million).
Top Japanese brewer Kirin Holdings' (2503.T) Australian dairy and juice producer National Foods is interested in bidding, a source told Reuters this week. Other potential buyers include New Zealand unlisted dairy giant Fonterra, Italy's Parmalat (PLT.MI), Australian food group Goodman Fielder (GFF.AX) and Singapore's Olam International (OLAM.SI).
The suitors seen having the most to gain in potential cost savings are those with their own dairy operations, including Fonterra, Parmalat, National Foods and the Murray Goulburn dairy farmers co-operative.
But the same firms are also the most likely to raise eyebrows at the Australian Competition and Consumer Commission (ACCC), the regulator that must approve all takeovers, sources familiar with the situation told Reuters.
"All the key players are likely to have ACCC concerns on milk assets. The ACCC will be poring over all the details," said a banking industry source.
Parmalat, which has about 350 farmer suppliers in Queensland state, would have substantial overlap in that state with Dairy Farmers, which is owned by about 2,000 farmers and makes Dairy Farmers brand milk, Coon cheese and Ski yoghurt.
National Foods' plain milk business in New South Wales state would also overlap with Dairy Farmers.
Some of the dairy firms may already be talking to each other in case Dairy Farmers needs to divest some assets.
"There's a lot of discussions going on on that front," the banking source said.
Last month, the regulator cleared Dairy Farmers' acquisition of small rival Perfection Dairies, saying the merged company would still be constrained by several competing firms.
Dairy Farmers has sent out confidentiality agreements to prospective buyers, and the sale process is expected to take several months.
Another source familiar with the situation said that to achieve anticipated cost savings, the most likely outcome would be one of two scenarios.
"Either National Foods buys Dairy Farmers and Parmalat mops up the bits they can't keep, or vice versa," the source, who was not authorized to speak to the media, told Reuters.
Parmalat, National Foods and Dairy Farmers declined comment. Continued...
