AUS: Bega Cheese to sell WCB stake to Saputo
Bega said "obligation" to shareholders meant it had decided to sell up to Saputo
Australian dairy company Bega, which dropped out of the race to buy WCB last month, has opted to sell its 18.8% stake in the company to Saputo for what could amount to A$101m (US$88.8m).
Saputo is one of two remaining bidders for WCB, alongside a third Australian dairy processor, Murray Goulburn. Its A$9.20-a-share offer for WCB will increase in stages when it receives the backing of certain amounts of the company's shareholders. Ultimately, if over investors representing over 90% of WCB shares back Saputo's bid, the offer rises to A$9.60 a share.
Bega's decision to accept Saputo's offer would leave the Canadian group with shares representing around 45.2% of WCB. On Monday, WCB said Saputo had secured the backing of 26.4% of its shareholders.
Bega said it will receive between A$94.7m and A$101m depending on the backing Saputo receives by the time its offer closes.
The proceeds will see Bega collect a profit before tax and costs of between A$61.8m and A$68.2m.
Bega said it was "disappointed" not to be able to buy WCB itself. The company insisted its "strong preference" was for WCB to "remain Australian owned" - either through its own bid or through Murray Goulburn's offer. Bega left the race after only a handful of WCB shareholders, facing cash-only offers from Saputo and Murray Goulburn, backed its cash-and-stock bid.
Bega said it was "conscious of the significant value of the WCB shareholding and its obligation to shareholders to continue to make sensible investment and capital management decisions".
Bega first invested in WCB in 2010. The company acquired a 15% stake, a move that came amid a wider equity raising at WCB. It tabled the first bid for WCB in September, igniting a takeover battle that attracted Murray Goulburn - already a WCB shareholder - and Saputo.
Bega executive chairman Barry Irvin said: "Bega's investment in Warrnambool Cheese & Butter has been a resounding success for both companies, enabling WCB to pay down debt in a time of need and positioning the company for the future. Bega Cheese's initial investment in WCB and subsequent takeover for the company has created significant value for both companies' shareholders. Bega Cheese's takeover offer was the catalyst for a process which has highlighted the value of the Australian dairy industry, a re-rating of Bega Cheese' share price and a substantial profit for Bega Cheese."
Irvin said the proceeds from the sale would be used "to pursue a number of strategic business opportunities, which will ensure Bega Cheese's reputation for being a leader in manufacturing milk pay-rates and delivering stable and growing returns to shareholders".
He added: "We wish Saputo well with their investment and look forward to working with them for the betterment of the Australian dairy industry."
There has been disquiet in some quarters at the prospect of an overseas company buying an Australian asset.
Murray Goulburn, which has emphasised what it sees as the benefits of an Australian group owning WCB, said it "noted" Bega's decision. It added: "MG will assess the ramifications of this development as it relates to MG's bid for WCB and also MG's 17.7% shareholding in WCB, and will continue to monitor the situation as it evolves."
Kirin Holdings, the Japanese food and drinks group, holds a 9.99% stake in WCB. It made the investment soon after the takeover battle begun as a strategic move. WCB produces cheese sold under brands owned by Kirin's Australian dairy arm Lion.
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