THE battle for control of Warrnambool Cheese and Butter (WCB) was ramped up yesterday when the Allansford processor recommended that shareholders accept a bid by international company Saputo.
An off-market offer of $7 per share by Canada-based Saputo was unanimously recommended to shareholders by WCB directors.
Saputo’s offer, which values WCB at $393 million, is significantly above the offer by Bega Cheese that is already on the table and which directors rejected as inadequate.
Bega’s offer, which opened last week, is for 1.2 Bega shares plus $2 for each WCB share. At yesterday’s closing price Bega’s offer was worth $6.20.
WCB chief executive David Lord said the Saputo bid offered good value and that accepting the offer would provide shareholders and suppliers with greater security and potential for expansion.
“The directors unanimously recommend this offer to shareholders in the absence of a superior proposal,” Mr Lord said.
“Saputo’s all cash offer provides greater certainty for WCB shareholders and a substantial premium for WCB shares.” Mr Lord said he was comfortable recommending the sale to an overseas owner because of the benefits it would bring.
Visiting the Allansford factory yesterday, Saputo chief executive Lino Saputo jnr said his company had been looking for an Australian base for more than a decade and first had talks with WCB 10 years ago. Saputo made an unsuccessful takeover offer to WCB in October 2009 of about $4 per share.
“We identified Warrnambool as the ideal base for an Australian operation,” Mr Saputo said.
He said the expansion of the Asian market made the acquisition of an Australian manufacturing base increasingly important for Saputo.
Saputo ranks among the top 10 dairy processors globally, operating 53 factories and processing about 6 billion litres annually. It has factories in Canada, the US and Argentina.
It started as a family company in 1954 and was publicly listed in 1997, with Lino Saputo jnr being the third generation chief executive.
Saputo’s offer is subject to approval by the Foreign Investment Review Board and conditional on Saputo gaining at least 50.1 per cent of WCB shares.
Mr Saputo said an application was lodged with the investment review board about September 10 but he had not yet received any feedback.
Saputo has made a commitment to retain the corporate identify of WCB and its management.
“We can’t run this company from a satellite office in Montreal,” Mr Saputo said.
Reacting to the counter offer, Bega executive chairman Barry Irvin said he believed his company’s strategy of consolidating similar Australian companies with similar aims would be better for the dairy industry.
He said Bega’s offer would not be changed “at this stage”.
“We continue to believe it offers good value,’’ he said.
Unlike the Saputo offer, Bega’s bid is not conditional on gaining a certain percentage of the shares.
Investors reacted quickly to the Saputo offer, with WCB shares lifting to a high of $7.29 before closing at $7.18, up from Monday’s close at $6.46.
This activity indicates that some investors anticipate an even higher offer.
The Saputo bid will remain on the table until early December. Bega’s offer is slated to close on November 28, but it could be extended.