* Canada's Saputo swoops on Warrnambool with $370 mln bid
* Foreign interest in Australian dairy assets on rise
* Saputo would consider more acquisitions
By Maggie Lu Yueyang
SYDNEY, Oct 8 Canada's Saputo Inc
swooped on Warrnambool Cheese and Butter Factory Company
Holdings Ltd, potentially kickstarting a wave of
foreign purchases in Australia's A$4 billion ($3.8 billion) a
year dairy industry.
Canada's largest dairy producer knocked out a significantly
lower bid from Warrnambool's majority shareholder, fellow
Australian company Bega Cheese Ltd, to win approval
from the board for its A$392.7 million ($370.10 million) bid.
Australian dairy farmers have been battered in recent years
by a powerful combination of factors, including a supermarket
price war that slashed domestic wholesale prices, a strong
Australian dollar that crimped exports and a drought that sent
cattle feed costs soaring.
While there are bright spots on the horizon - the Australian
dollar is falling, demand from the Asian middle class is rising
- many local dairy farmers probably won't be able to hang on for
the good years in the face of well-funded foreign predators.
"We've got significant enquiries ... from both major local
producers as well as offshore investors looking for exposure to
Australian agriculture," said Jesse Manuel, a rural and
agribusiness specialist at Colliers International with a number
of dairy farms on its books. "Those investors are predominantly
from Asia including Singapore and China, also New Zealand."
Saputo, which operates in Canada, the United States and
Argentina, has long been looking at Australia as a platform to
expand its global presence and tap growing demand in Asia's
"This is our dream of ultimately having an Australian
platform," Saputo CEO Lino A. Saputo, Jr. said in a media
briefing. "We believe Australia has the ideal platform for us
getting products into those emerging markets."
Sales of dairy products in China are worth some $45 billion
a year and are expected to grow rapidly through 2017 to about
$89 billion, according to a Frost & Sullivan report.
Ray White, another agent rural assets agent, recently sent a
team to China to engage with potential investors in Beijing.
"The biggest interest in rural is in dairy," Ray White
Rural's chairman Paul White said.
White said interest in Australia had been spurred by
problems with the supply in China, such as the 2008 tainted milk
powder scandal that killed at least six babies and sickened
thousands more, and this year's contimation scare including an
ingredient from New Zealand's Fonterra.
"Australia is starting to get quite a focus," he said.
Australia's largest dairy business, Van Diemen's Land, said
it is in talks with potential investors to raise A$180 million.
According to local media reports, possible investors include
China Investment Corp (CIC), the country's sovereign
wealth fund, and Fonterra.
Fonterra had no immediate comment, while CIC could not be
immediately reached for comment.
Analysts consider Van Diemen's Land, which includes several
dairy farms in Tasmania and across northwest Australia, a
takeover target. The dairy company did not reply to a call
seeking comment on Tuesday.
China's biggest beverage company Wahaha told Reuters last
year that it was also looking to buy Australian dairy farms to
supply milk powder back to China.
Colliers is marketing Raleigh Dairies, which owns two farms
on the east coast of the country, and Lactanz Dairies in Western
Australia. Another business owned by private New Zealand company
Rosmerta is up for sale after going into receivership.
Saputo made an off-market offer of A$7.00 per share for
Warrnambool in an all-cash deal, which the Warrnambool board had
recommended shareholders to accept. That was well above a A$5.75
per share offer from majority owner Bega Cheese Ltd in
Saputo currently has a sales office in China, and is selling
dairy products into other Asian markets such as Japan, Taiwan
and South Korea, out of its Argentina operations.
The CEO said he expected the company's planned growth to
come from more acquisitions, potentially in Australia.
"Of course if there are other assets available for sale, we
will be part of that process," he said. "Our balance sheet is
very very clean, which provides us quite a bit of flexibility
for other acquisitions."
Warrnambool CEO David Lord told reporters that the Saputo
offer - representing a 57 percent premium to the one-month
volume-weighted average price of Warrnambool shares before
Bega's offer was announced - was far superior to the Bega bid in
terms of both value and conditionality.
Warrnambool shares surged 11.8 percent to A$7.22 by 0200
GMT, touching an all-time high of A$7.29, after the takeover was