WARRNAMBOOL Cheese and Butter (WCB) yesterday made its first response to shareholders on the takeover offer by Bega Cheese.
The essence of the response is that WCB directors are still thinking about it and will make a formal response in mid-October, when the offer period will be open.
In a letter to shareholders, chairman Terry Richardson said the offer was “highly opportunistic” given the improving market conditions and business initiatives under way at WCB.
“The board of WCB is currently reviewing the offer and the bidder’s statement lodged by Bega, with the assistance of our financial and legal advisers,” Mr Richardson wrote.
Bega Cheese last week made an off-market offer to WCB shareholders offering 1.2 of its own shares, plus $2 for every WCB share.
The offer will open next week and remain open for at least a month.
Mr Richardson said in his letter that an expected improvement in short-to-medium-term fundamentals in global dairy markets, including a substantial weakening of the Australian dollar, provided a positive outlook for WCB’s growth and profitability and would create significant value for shareholders.
“WCB directors will assess these factors as we consider whether Bega’s offer adequately reflects the value of the WCB business today, the expected future earnings uplift from the initiatives currently under way and the improving market conditions.
“Given the highly-favourable outlook for WCB, we consider the timing of the offer to be highly opportunistic.”
He told shareholders they would receive WCB’s formal response, including the directors’ recommendation, about mid-October.
“Until WCB directors have issued their formal recommendation regarding the offer, you are advised to take no action.” Mr Richardson advised.
WCB shares have risen sharply since the offer.
Trading on the stock exchange closed at $6 on Tuesday, having risen from $4.51 the day before the offer was announced.