Warrnambool Will Find A Whey With Natfoods
The Age
Thursday June 5, 2008
WARRNAMBOOL Cheese and Butter Factory has thrown its hand into the $800 million auction of rival Dairy Farmers, teaming up with National Foods in a joint offer.
WCB, the only listed dairy company on the local sharemarket, is a minnow compared with its rivals, with a market capitalisation of just over $180 million even after the 23? fillip in it share price to $4.63 in the wake of joining the bidding yesterday.The NSW-based Dairy Farmers, officially known as Australian Co-operative Foods, signalled last year it was looking at options other than a stock exchange listing, and in recent weeks has been receiving bids from dairy market players, both in Australia and overseas.Three parties already operating in Australia, including National Foods (owned by Japanese brewer Kirin these days), have already made applications to the Australian Competition and Consumer Commission for approval to buy Dairy Farmers.The other two are the New Zealand-based Fonterra, which bought out another Victorian dairy group, Bonlac, several years ago, and the Italian-owned Parmalat, which is bidding with Victorian dairy giant Murray Goulburn Co-operative.The arrangement with National Foods is that if it wins Dairy Farmers, it will joint venture that company's cheese operations with Warrnambool Cheese and Butter Factory.National Foods' current cheese brands are at the specialty end, through the King Island brand, while WCB already makes bulk cheese for Dairy Farmers to market under the Coon, Cracker Barrel and Mil Lel brands it bought from Kraft more than a decade ago.The other "synergy" between National Foods and WCB is the Warrnambool group's chief executive, Neil Kearney, who joined the group in April 2007 after having been NatFood's chief financial officer.Estimates of Dairy Farmers' worth have ranged widely. It made about $57 million before interest, tax, depreciation and amortisation (EBITDA) last financial year and is tipped to make up to $70 million this financial year. On industry multiples of between nine and 11 times EBITDA, that values Dairy Farmers at between $600 million and $800 million. Running in its favour is the roaring price of milk and milk products on world markets, which may draw in more buyers, at higher prices.Dairy Farmers has revealed little detail on the bidding process, but it is believed those on the shortlist are already gaining access to its financial information, and the whole process is expected to take up to another four months to complete.
© 2008 The Age
