Bega offer dismissed by WCB board

Bega offer dismissed by WCB board

Australian dairy processor Warrnambool Cheese and Butter Factory, which has rejected a takeover bid from local peer and shareholder Bega Cheese, has forecast EBITDA could double in its current financial year.

WCB, which last week rebuffed what it called an "inadequate" offer from Bega Cheese, has told shareholders it expects EBITDA for the year to the end of June to reach A$47-52m (US$44.1-48.8m) That compares to the A$25.5m it reported in its last financial year.

The company is planning to provide detailed financial forecasts to investors later this month. However, it said yesterday (2 October) an "improvement in market conditions", combined with its own strategy, means EBITDA is estimated to be "significantly higher".

CEO David Lord said: "This improved earnings outlook is another reason why WCB is recommending that WCB shareholders reject Bega's inadequate offer for their WCB shares."

Last month, Bega, which owns an 18% stake in WCB, made an offer worth A$319m to buy the rest of the business.

The bid on the table would see WCB investors receive 1.2 Bega shares plus A$2 a share for their stake. Bega said the offer equated to a 30% premium to the volume average weighted price of WCB shares over the past month.

Bega has insisted the enlarged business would benefit from a "globally relevant" scale. Announcing the offer, executive chairman Barry Irvin said the "benefits for each company's shareholders, many of whom are farmer-supplier shareholders, are highly attractive".

However, Lord and chairman Terry Richardson insisted there were "risks" in owning Bega's shares and said the offer was "timed to exploit recent gains in Bega's share price". 

"The timing of Bega's offer is highly opportunistic and fails to reflect the value of a number of recent business improvement initiatives undertaken by WCB," the men said in a statement. "Bega's offer is highly conditional and uncertain and may result in a potential tax liability for WCB shareholders."

They also said the possible synergies from a deal would be "materially higher" than the A$7.5m set out by Bega.

They added: "WCB has strong prospects as a globally focused manufacturer of value-added dairy products with a strong platform for future growth."

Three years ago, WCB rejected and ultimately fought off a takeover bid from another shareholder, Australian dairy co-op Murray Goulburn.