Trading halt, expert concerns fail to sour WCB investors

WARRNAMBOOL Cheese and Butter (WCB) shares were unaffected by Friday’s halt on Saputo’s takeover offer ordered by the Takeovers Panel.

Shares traded in the $9.23 to $9.28 range yesterday, similar to the latter part of last week.

Saputo yesterday declared to the Australian Securities Exchange (ASX) that it had acquired 10.99 per cent of the WCB register before the Takeovers Panel’s order was issued. Saputo cannot accept any more shares until the panel completes an investigation into aspects of its takeover offer.

The probe was sought by rival bidders Murray Goulburn and Bega Cheese.

In a statement to the ASX yesterday, Saputo said there was no certainty until completion of proceedings that acceptances of its offer would result in it buying the offered shares. 

Meanwhile, Canadian analysts have questioned the wisdom of Saputo’s determined pursuit of WCB, describing it as irrational, political and dangerous.

Fund manager John Stephenson, of First Asset Investment in Toronto, is quoted in The Canadian Press as saying Saputo investors were starting to become jittery.

“I think it’s starting to get to the silly zone where the deal dynamics are driving this,’’ Mr Stephenson said, adding anything above a 10 cent rise would be “a bit of a worry’’.

“They can probably make this work at $9.50 or maybe $9.60, but if they are going to chase this up $10, I think that’s crazy,’’ he said.

Chairman and chief executive officer of Mawer Investment Management, Jim Hall, told The Canadian Press that Saputo had changed its acquisition strategy from insisting that a deal makes economic sense to looking at the bigger picture.

“It’s a red flag. We’ve seen several other companies use this kind of logic to close high-priced acquisitions only to later regret them.’’

Murray Goulburn leads the bidding with an offer of $9.50 per share and managing director Gary Helou is equally determined to gain control of WCB.

Mr Helou told The Standard last week the timing of the takeover chase was not of his making, but acquisition of WCB had been a long-term aim. He said the bidding triggered by Bega had brought forward his company’s plan.

Analysts say the fierce bidding for WCB has made it the world’s most expensive dairy company on a price-to-earnings basis.  The Murray Goulburn offer values WCB at $532 million. It made just $7.5m profit last year and $15.2m the previous year.

(Steve Hynes is a WCB shareholder).

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