Murray Goulburn circles Peters Ice Cream in $400m play

REBECCA URBAN
MARCH 21, 2014
THE AUSTRALIAN
AUSTRALIA’S largest dairy processor, Murray Goulburn, is believed to be mulling a $400 million purchase of the Peters Ice Cream business as it forges ahead with its ambitious plan to consolidate the local dairy industry.
Fresh from booking a $51m profit following the Warrnambool Cheese & Butter takeover battle, the Melbourne-based co-operative has recently hosted a presentation by management of the ice cream company, which is currently being shopped around by its private equity owner, Pacific Equity Partners.
Speculation has been mounting in recent days that Murray Goulburn, which looked into a potential purchase of the business two years ago before it was snapped up by PEP, has made an indicative offer in the range of $400m, subject to a request to conduct further due diligence.
PEP purchased the company behind the iconic Drumstick and Icy Pole frozen treats from Nestle for about $250m in June 2012 and has recently hired investment bank Morgan Stanley to oversee a trade sale or public float.
Murray Goulburn chief executive Gary Helou did not return The Australian’s calls last night. And a spokeswoman for PEP could not be contacted.
Mr Helou, however, has made no secret of his ambition to turn Murray Goulburn into a serious global dairy player, having been outspoken about the need for consolidation of the local dairy industry if it is to play any meaningful role in meeting the growing appetite for dairy foods in Asia.
The company proved to be a formidable opponent in the recent takeover battle for Warrnambool, in which it held a 17 per cent stake, losing out to Canada’s Saputo largely due to the long delays associated with it seeking clearance from the Australian Competition Tribunal.
Despite the failed $500m-plus bid, Mr Helou recently pledged to push forward with his expansion strategy, telling The Australian that “regardless of what happens with Warrnambool, we have some very, very interesting growth prospects that we are pursuing”.
Financing is not likely to be a barrier to Murray Goulburn pursuing sizeable acquisitions given it attracted strong support from its banking syndicate throughout its pursuit of Warrnambool. The dairy farmer-owned co-operative is also considering a capital restructure, including a possible float of a “shareholder fund” on the Australian stock exchange.
A purchase of Peters Ice Cream, which reportedly booked a pre-tax profit of $50m last financial year, would represent a new revenue stream for the company, which last year entered the drinking milk market by striking a significant supply deal with Coles supermarkets.
According to IBISWorld, Australia’s ice cream industry has annual revenues in excess of $630m a year, with Peters being the largest local player, with a 37 per cent share of the market.
And while the industry is forecast to produce a modest growth of about 1.8 per cent a year over the next five years, an anticipated resurgence in export demand after a period of volatile domestic milk prices and a strong Australian dollar could present a significant growth channel for domestic companies.
According to IBISWorld, exports are estimated to rise by more than 28 per cent this financial year, “due to increased demand from neighbouring markets in the Asia-Pacific, substantially benefiting industry profitability”.
Other mooted buyers for the company, which is more than 100 years old, have included Bulla, France’s R&R Ice Cream and other private equity buyers.