Takeover withdrawal clears way for Dairy Board deal with Bonlac

The Dairy Board has welcomed the decision by Melbourne-based Murray Goulburn to withdraw its takeover bid for the board's proposed ally in Australia, Bonlac Foods.

Dairy Board director Harry Bayliss, who has been visiting Victorian farmers in the run-up to their vote this month on the board's deal with Bonlac, said the Murray Goulburn rollover was welcome.

"It removes a major uncertainty, and will allow Bonlac farmers to concentrate on the merits of the offer we have put before them."

Murray Goulburn withdrew its $A870 million ($1.05 billion) takeover proposal for Bonlac, citing concerns that it could not follow through with its proposal to deliver improved milk prices and that a confrontational relationship had developed between the two companies.

The move paves the way for the Dairy Board to win 25 per cent of Bonlac by formalising the proposal which is now on the table.

The Dairy Board and Bonlac have formed an alliance to establish a joint consumer business in a deal that values the enterprise at $A825 million.

Bonlac chief executive Alex Sloan said that when the alliance with the Dairy Board was concluded, Bonlac would be keen to work constructively with Murray Goulburn to explore areas of cooperation that would benefit both sets of shareholders.

National Foods, the other Australian company which tried to beat the Dairy Board out of the alliance with Bonlac, is considering another acquisition in the dairy foods sector.

Managing director Max Ould told the Australian Financial Review that the company would now concentrate on developing other growth opportunities. A company spokesman declined to elaborate.

Some industry observers have questioned whether National Foods could be after New Zealand Dairy Foods, which is scheduled to be sold off by New Zealand Dairy Group in the run-up to the planned mega-merger.

The sale of Dairy Group's 50 per cent stake in Dairy Foods would satisfy concern about the mega co-op, Global Dairy Co, dominating the domestic market for branded dairy consumer goods. The other 50 per cent is owned by about 7000 Dairy Group farmers.

Dairy Group has been buying into National Foods, and by December last year had 18.7 per cent of the Australian company.

Some analysts have been puzzled by the fact that if it wanted to lift its stake above 19.9 per cent, Australian takeover rules would require a full takeover bid.

But the strategic stake might make it easier to arrange a deal in which National Foods bought up Dairy Foods on this side of the Tasman, while the mega-cooperative maintained its minority stake in National Foods.

National Foods' second-biggest shareholder is an Australian investment company, Perpetual Investments, which holds only a 10 per cent stake, so the Dairy Group shareholding offers potential for it to exercise considerable influence in Australia's No 1 publicly traded dairy company.

Dairy Foods executives are reported to have been lobbying in Wellington to block GlobalCo's plans to directly manage the Dairy Foods sale.

Dairy Foods chairman John Storey and chief executive Peter McClure were reported to have lobbied against GlobalCo's being in a strong position to choose a complementary competitor for Mainland, the domestic consumer foods company, now owned by Kiwi Dairies, which it will keep.

- NZPA