SPECULATION that Canadian firm Saputo might further up the ante in the bidding war for Warrnambool Cheese and Butter yesterday lifted WCB’s share price and that of its initial suitor, Bega Cheese.
WCB shares closed yesterday at $8.11 — well above last week’s bid of $7.50 from Murray Goulburn (MG) and Saputo’s offer of $7.
Bega Cheese’s share price closed at $4.08, up from $3.90 on Friday.
Senior industrial analyst with investment bank Canaccord Genuity, Mark Topy, said the prices being offered for WCB were entering “silly prices” territory.
“The bids are more about strategic value than business value,” Mr Topy said.
Bega Cheese began the bidding war last month with an offer of 1.2 Bega shares plus $2 for WCB shares, but WCB last week told shareholders the offer was inferior.
WCB is still considering last week’s offer from MG that is expected to be discussed at WCB’s annual general meeting in Warrnambool on Thursday.
Mr Topy said Murray Goulburn’s bid, which valued WCB at $420m, was above the independent valuation. KPMG Corporate Finance has valued WCB’s shares at between $6.96 and $7.49.
Mr Topy said the bidding war had become “a game of ego, of who really needs the assets”.
Saputo was the most likely company to top MG’s offer, he said.
Saputo was a US$10 billion company that had a lot more “firepower” than MG or Bega Cheese, he said, with more money and access to additional equity capital than the other two suitors.
Saputo is keen to establish a foothold in Australia and previously made a bid for WCB in 2010.
It has said it was keen to expand WCB and its offer was not part of a consolidation of operations.
Mr Topy said speculation was rife about responses by other industry players to WCB’s offer but he put little credence in rumours that New Zealand firm Fonterra — the world’s largest dairy exporter — would make a bid.
Fonterra already has dairy factories in Dennington and Cobden and world-scale plants in New Zealand.
“I’m not sure what WCB can bring to the table for Fonterra.” Another disincentive for Fonterra was that it distributed Bega Cheese products.
Media reports said senior executives from Saputo had postponed flights to Australia to discuss MG’s surprise counter-bid last week to its offer.
Bega shareholders will meet today, when they are expected to discuss a response to MG’s offer.
The Foreign Investment Review Board would have to approve any takeover of WCB by Saputo while MG’s bid would have to be approved by the Australian Competition Tribunal.
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