THE four-month battle for control of Warrnambool Cheese and Butter (WCB) ended yesterday with Saputo gaining a controlling shareholding within hours of its takeover bid expiring.
An overnight surge of acceptances pushed the Canadian company’s holding from 47.85 to 52.7 per cent ahead of yesterday’s 7pm deadline.
Yesterday's late surge was not unexpected, with fund managers holding small percentages of the WCB register waiting until the last minute on the chance of Murray Goulburn making a higher offer or entry of another bidder.
WCB chief executive David Lord, whose board of directors has supported Saputo’s bid throughout, said he was very pleased with the outcome.
“It has been our single-minded focus to get this outcome, which we believe is best for all stakeholders,” Mr Lord said.
“It’s a terrific result for our shareholders who will receive a large premium on their shares.
“It’s also good for our employees who now have some certainty about their future and it’s good for suppliers of all dairy companies because they continue to benefit from strong competition for milk supply.
“As a company we are pleased to see that the majority of shareholders have come to the same view as the WCB board.”
With Saputo’s Montreal headquarters closed for business when the announcement came through, Saputo chief executive Lino Saputo jnr was not available for comment.
While the champagne will no doubt flow in Montreal, rival bidder Murray Goulburn is left to contemplate its costly and unsuccessful entry into the bidding war.
The co-operative, which holds 17.7 per cent of the WCB register, responded with a brief media statement yesterday morning saying it “will now commercially assess this development” and that “no more statements will be made until such time as a decision has been made and relevant stakeholders advised”.
Saputo’s acquisition of more than 50 per cent triggers the first tier of its stepped offer price, with shareholders now to receive $9.20 per share. The figure will increase to $9.40 if it reaches 75 per cent and $9.60 if it gets to 90 per cent.
Gaining a controlling interest also automatically extended the offer period until 7pm on February 4, giving those who haven’t sold a chance to do so.
If Saputo acquires 75 per cent within that period, the offer will be extended again in the hope of exceeding the 90 per cent threshold, at which point any remaining shareholders would be forced to sell.
Two companies, Murray Goulburn and Japanese firm Lion, stand in the way of that occurring, but both would seem likely to sell.
Murray Goulburn has little incentive to remain a minority shareholder, while it can walk away with a profit of $45 million by selling its stake, bought for mainly $4.60 per share.
Lion bought a 10 per cent blocking stake in the middle of the bidding war, paying $9.25 per share, to protect its cheese supply contracts with WCB. With Saputo now in charge and seeking full ownership, a sale seems likely.
Mr Saputo said at a shareholder meeting in November that he would happily continue the arrangements with Lion.
“If we are successful we would work with Lion and honour their agreement with WCB. We would certainly not be seeking to end such a valuable agreement,” he said.
The opening of stockmarket trading in WCB shares was delayed for an hour yesterday to allow news of Saputo’s success to reach the market. When the market opened at 11am, 150,000 shares were traded within 20 minutes for $9.45.
Bill Richmond, senior stockbroker with Bell Potter Securities, said the activity was possibly a trader banking on Saputo gaining more than 90 per cent holding and taking the price to $9.60.
With an estimated 38 per cent of the WCB register held in the Warrnambool region, about $200 million is expected to flow into the area as shares are cashed.