Bega argues WCB shareholders may not want to accept Saputos higher offer

Bega argues WCB shareholders may not want to accept Saputo's higher offer

Bega Cheese has said it will fight on its bid to buy Australian dairy peer Warrnambool Cheese and Butter Factory - and cast doubt over whether a rival, higher offer from Canada's Saputo will prevail.

Saputo has agreed with the WCB board to make a A$7-a-share all-cash bid, which would trump a lesser cash-and-stock offer already made by Bega Cheese. WCB has dismissed Bega Cheese's interest but backed Saputo's bid and recommended its investors accept the offer.

However, Bega Cheese, which already owns 18% of WCB, has said its offer remains on the table and questioned whether Saputo's offer - which has conditions attached to it - will succeed.

"While the talk is all about a $7 bid, the $7 is only available if Saputo get 50.1% of WCB. Given that Bega has 18%+ [of WCB] and Murray Goulburn have 17%+, getting to 50.1% out of the remaining shareholders will be a very tough ask and therefore we attach a low probability of the bid getting up," a Bega spokesperson told just-food last night (9 October).

"If it doesn't get up then our bid is the best/only bid in town. If we satisfy our conditions - for example, change our constitution and get anti-trust clearance, which is expected by end of October, then we can process any acceptances as they come in."

The spokesperson added: "For some shareholders the headline bid price is not the only determinant here. Murray Goulburn for example might think it is better to have industry consolidation rather than another new player in the market. Some farmers will be more interested in whether they have a home for their milk and what price they are likely to get for their milk than the price they could get for their shares. [There is] no use getting A$7 for your shares if there are significant changes to your milk supply arrangements because this could significantly affect the value of your farm."

Earlier yesterday, in an interview with Australian broadcaster ABC, Bega Cheese executive chairman Barry Irvin has said the company would continue with its bid to buy WCB in order to create "an Australian-owned, very strong dairy company".

He said: "It's compelling in both terms of our offer price, which actually gives effect to a merger between Bega Cheese and Warrnambool Cheese and Butter and indeed the vision that we have to create an Australian owned, very strong dairy company that would include iconic Australian names like Bega Cheese, Warrnambool Cheese and Butter and indeed Tatura Milk Industries.

"At the end of the day I'm always very respectful that this is a decision for individual share holders and this is about individual shareholders getting all the information they can and reflecting on what best suits their circumstance."

The value of Bega's bid has risen since it was tabled last month, as the price of the company's shares has increased.

"We believe there is a great deal of merit in our offer in terms of people having the opportunity to become shareholders in a larger, stronger dairy company. What we're presenting is a strong vision for the future," Irvin told ABC.

"We're sitting their with an offer with no minimum acceptance and we've said right the way through we'd ideally like a merger that brings the business together but we've equally said that we would be happy to become larger shareholders in Warrnambool Cheese and Butter and continue to work towards the consolidation of the Australian dairy industry."

Nevertheless, Bega's bid is still lower than the offer Saputo is set to make. "When asked if Bega would consider increasing its bid, he told ABC: "We're very comfortable with the offer that we've made."