SAPUTO’S ambition to take control of Warrnambool Cheese and Butter (WCB) took a massive leap forward yesterday when Bega Cheese decided to sell its stake to the Canadian processor.
UPDATE: Saputo has this morning announced acceptances totalling 46.17% of WCB.
Acquiring Bega’s 18.8 per cent stake takes Saputo to within a stone’s throw of passing the 50 per cent threshold that would put WCB under Canadian control. It deals a severe blow to the ambitions of rival bidder Murray Goulburn.
There are more than enough shares in the hands of institutional investors to take it over the line.
It leaves Murray Goulburn, which holds a 17.7 per cent stake and still awaiting clearance to proceed from the Australian Competition Tribunal, with little chance of success.
The co-operative issued a brief statement late yesterday acknowledging the development.
“MG will assess the ramifications of this development as it relates to MG’s bid for WCB and also MG’s 17.7 per cent shareholding in WCB,” the statement said.
Bega’s decision draws a four-month bidding war for WCB close to conclusion.
Bega started it all with an off-market bid on September 12, only to soon draw rival bids from Saputo then Murray Goulburn, driving the WCB share price from $4.51 before the bidding started to $9.40 at the close of trading on Thursday.
Bega bowed out of the bidding last month after its offer failed to gain traction against the rival bids, with executive chairman Barry Irvin saying it was not financially prudent for the NSW processor to lift its offer.
Bega was left holding an 18.8 per cent stake for which it paid a total of $32.9 million, but was now worth between $95 million and $101 million.
Mr Irvin told The Standard the sale to Saputo was not his preferred option but was the most responsible action in the interests of Bega shareholders.
While he would have preferred a sale to Murray Goulburn, Mr Irvin said the risk of the co-operative failing to gain regulator clearance was too big a gamble to take with Bega’s valuable shareholding.
“The Bega Cheese board is conscious of the significant value of the WCB shareholding and its obligation to its shareholders to continue to make sensible investment and capital management decisions.
“The risk of waiting on the Murray Goulburn outcome was just too great,” Mr Irvin said. “I’m disappointed we could not realise our vision to combine WCB and Bega Cheese. It was our strong preference for WCB to remain Australian owned and operated, either as part of Bega Cheese or Murray Goulburn.
“While our bid was not successful, our focus remains the same. The significant profit realised by the sale of our WCB holding will add to our capacity to pursue a number of strategic business opportunities.”
The price received by Bega for its holding will depend on the ownership level reached by Saputo, ranging from $94.7 million to $101 million, delivering it a profit before tax and costs of between $61.8 million and $68.2 million.
The almost certain outcome will please the WCB board, which has supported Saputo’s takeover bid from the outset.
(Steve Hynes is a WCB shareholder)