Murray Goulburn will consider debt funding of up to $100m to shore up the current farmgate price of $5.20kg milk solids (MS).
The dairy processor has also spent nearly $5m buying shares on-market, which has raised its stake in WCBF to 11.4%, against 9.9% in November 2010.
The move, made last month, follows Bega Cheese’s acquisition of 15% of WCBF in November.
Bega Cheese acquired the 15% stake at the invitation of its rival, Warrnambool Cheese & Butter, with Bega Cheese executive chairman Barry Irvin joining the WCB board.
The two companies have formed a strategic management group to “explore and evaluate opportunities for mutually beneficial cooperation”.
The $22.6m placement – 6m shares at $2.90 – is part of a total capital raising of $37m, is accompanied by a one-for-six share offer to WCB shareholders, and the issue of 7.7m further new shares at a price of $2.50 per share.
Earlier this year, WCB rejected a takeover offer at $4.50 a share from dairy giant Murray Goulburn.
WCB chairman Frank Davis says the cornerstone investment by Bega Cheese, together with the entitlement offer, will allow WCB to significantly reduce its debt and provide capital to pursue further growth options.
Irvin says Bega looks forward to supporting WCBF in its pursuit of future growth opportunities, and to working collaboratively with WCBF through the proposed strategic management group.
Murray Goulburn slammed the partnership, saying its initial takeover bid was made with a longer-term perspective and that it remains committed to an investment which allows it to be part of a process that is “yet to conclude”.
The WCB capital raising addresses the level of debt the company carries. However, Murray Goulburn was not consulted at all about its willingness to participate in the share placement, the company says.
As a 100% farmer-controlled cooperative, Murray Goulburn’s only interest is to increase the benefits it offers its farmers and the board remains committed to exploring all avenues by which this can sensibly be achieved, the company said in a statement.
“We believe that consolidation, not just with WCB and Murray Goulburn, but now also with Bega, can still deliver substantial benefits to farmers and the Australian dairy industry.
“If Australian dairy farmers are to successfully compete in the global market and receive higher farmgate returns in the future, it is important that Murray Goulburn delivers critical supply chain efficiencies, including those delivered through industry rationalisation and collaboration.
“With this in mind it is important to recall that the ACCC process triggered by our proposal to acquire WCB earlier this year did not reach a conclusion.
“Murray Goulburn withdrew its proposal because we did not see any realistic opportunity for further talks with WCB in the short-term and the 15% cap on shares in WCB limited the potential shareholding.
“The ACCC has left the door open for future approaches on this matter and we are disappointed that public statements on the ACCC process and outcome do not accurately reflect the position.”