THE battle for control of Warrnambool Cheese and Butter (WCB) has escalated to an all-out bidding war, with Canadian-owned Saputo upping the ante and Murray Goulburn signalling that it is not about to capitulate.
Saputo yesterday trumped Murray Goulburn’s offer of $7.50 per share with a bid of $8, valuing WCB at $448 million.
Yesterday’s bid is well above the $6.96 to $7.49 range independently assessed by KPMG Corporate Finance as the true value of WCB shares.
Despite this, Murray Goulburn (MG) reacted to the offer within hours in a media statement, urging WCB shareholders not to react prematurely by giving up their shareholdings.
“MG remains committed to acquiring WCB and to satisfying all conditions associated with its offer as quickly as possible,” the statement said.
The market also decided the bidding war has some way to go. Trading on the Australian Securities Exchange pushed the WCB share price from Thursday’s close of $8.15 to $8.42 on a traded volume of 466,000 shares.
Saputo chief executive Lino Saputo reiterated the company’s plans for WCB.
“Saputo plans to continue to operate Warrnambool’s facilities at Allansford and Mil Lel and will look at investing to expand Warrnambool’s operations to increase manufacturing capacity. In turn, this should provide suppliers with more opportunities to sell their milk.
“We know how important competition is for milk producers. Saputo does not currently have a business in Australia, so Saputo’s arrival ... will not reduce competition. Instead, we will ensure WCB is well-financed and remains a vibrant competitor,” Mr Saputo said.
The WCB board had earlier recommended that shareholders accept Saputo’s first offer of $7 per share and it made the same recommendation in regard to yesterday’s bid, in the absence of a superior offer.
However, the same enthusiasm is not shared by the Victorian Farmers Federation (VFF) or United Dairyfarmers of Victoria (UDV), both of which urged shareholders to keep the company under Australian ownership.
Speaking earlier this week, UDV president Kerry Callow said this was “a time for strategic thinking”.
“If we want control and influence in our industry we have to think about the effect of losing control of a large part of our manufacturing sector.”
VFF president Peter Tuohey said Saputo may be able to bring some opportunities, but the company’s priority would be returns to shareholders, not returns to farmers.
Saputo is publicly listed in Canada, with the Saputo family holding a controlling interest.
Saputo’s offer is conditional on gaining at least 50.1 per cent of WCB shares. With Bega Cheese and Murray Goulburn jointly holding 35 per cent of WCB shares, Saputo would have to gain 77 per cent of the remaining shares to reach that target.
The sentiment of shareholders will therefore be crucial to the success or failure of the bid.
Bega Cheese started the takeover bidding with an offer of 1.2 Bega shares, plus $2 for each WCB share. It declared at its annual general meeting on Tuesday that it was still in the chase.
n WCB yesterday announced that shareholders had voted to return Kay Antony, Neville Fielke and Ray Smith to its board and elected Robert Lane to fill the remaining position.
Mr Lane is the managing partner of business consultancy group SED Advisory and chairman of South West Credit.