Canadian company Saputo lifting its majority stake in Warrnambool Cheese and Butter (WCB) to 98.4 per cent – effectively a takeover – is positive news for farmers, a dairy analyst says.
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Japanese-owned dairy and brewing giant, Lion, sold its 10 per cent stake in WCB, effectively ending a three-year takeover bid.
Rabobank Australia and New Zealand senior dairy analyst Michael Harvey said the move by Saputo – which means Warrnambool Cheese and Butter will no longer be publicly-listed – was not a surprise.
“If you go back to the original investment, Saputo had always talked about wanting to invest in this part of the world, Australia and New Zealand, and the strategy was really around tapping into the Asian growth story and using the Australian sector as a means to do that given our proximity to market and our well-established trade links into the region anyway,” he said. “They see this as a long-term investment, they see this as sort of tidying up originally what they were trying to do anyway, which was to buy Warrnambool Cheese and Butter to make it part of their global supply chain to service the Asian region.
“In general Saputo have been very clear about what they’re trying to do with the Warrnambool Cheese and Butter business, and that’s to invest in it, and that’s good news for farmers I suppose because they’re trying to grow their capacity to produce cheese and they’ll need more milk for that.”
Mr Harvey said not having to comply with some regulatory and reporting requirements for a publicly-listed company would deliver savings.
Lion has formally accepted Saputo Dairy Australia’s offer to acquire all of the ordinary shares Lion holds in WCB, at this week’s improved price of $9.05 a share. It originally bought a 9.99pc stake for $9.30 a share in late October 2013 after Bega Cheese had made an initial tilt at WCB, sparking a surprise counter bid by the Canadians. Saputo has confirmed it has received acceptances for just over 8 million shares worth about $75 million and has subsequently lifted its majority stake in WCB to 98.4 per cent.
While Lion says it will make a small profit as a result of the sale, its blocking stake in WCB, acquired at the height of the 2013-14 four-way battle for the big cheesemaker, was a “strategic one aimed at protecting Lion’s business’ broader interests”.