Bega victorious in Australia's dairy wars

Sydney - Bega Cheese will walk off with a pile of cash and a kingmaker role in Australia's "dairy wars" after virtually handing control of the country's oldest milk and cheese producer to a Canadian suitor.

Bega agreed on Thursday to sell its 18.8% stake in takeover target Warrnambool Cheese and Butter Factory Holdings to Saputo.  That effectively ends a takeover battle Bega itself started last year but abandoned as bids spiralled.

With the dust about to settle on one Australia's most intense bidding wars in years, Bega now has a $62.5m windfall, wiping out debt and freeing up funds for new products or acquisitions.

Milk extracts

Its position of strength, along with company statutes that would deter bidders, also means it hopes to stay independent even if international suitors call in what has become one of Asia's hottest food and drink sectors.

The intensity of the struggle for Warrnambool - nine bids or counter-bids since last September - reflects huge interest in Australia's agriculture assets amid surging demand from increasingly affluent southeast Asia for both high-tech milk extracts and traditional dairy products.

Bega chairperson Barry Irvin said: "Some might debate who actually got first prize."

He said Bega would sell its shares in what has become the world's most expensive dairy company on a price-to-earnings basis.

Bega is the largest cheese-cutting and packaging company in Australasia.

Growing appetite

Warrnambool stock rose amid counterbids from both Saputo and fellow Australian dairy producer Murray Goulburn Co-operative.

Irvin said Bega's decision to pull out of the race in late December as bid prices spiked was taken with a cool head - as was the decision to hold its stake until Saputo sweetened its offer.

Mark Topy, a senior industrial analyst at Canaccord Genuity Wealth Management, said Bega had played the battle well.

"The price Saputo paid for Warrnambool is very high and we wait to see how they are going to justify that price," Topy said.

With plentiful milk resources and the technology to make advanced health-promoting products from them, Australia's dairy businesses remain in demand for companies keen to serve Asia's growing appetite.

Earlier this week, China's Bright Food said it had agreed to buy Australian cheese and yoghurt producer Mundella Foods. The small, privately-held company specialises in probiotic yoghurt drinks and began exporting to Asia in 2010.