Canadian Manufacturing

Bega Cheese drops out of bidding war for Australian dairy firm

Says it won't extend Dec. 20 deadline for its cash and share offer for Warrnambool Butter & Cheese



MONTREAL—Saputo will face just one rival in the home stretch to acquire Australia’s oldest diary processor, with Bega Cheese withdrawing from the race for Warrnambool Butter & Cheese.

Bega, which launched the battle for Warrnambool in September, says it won’t extend the Dec. 20 deadline for its cash and share offer—which has attracted less than one per cent of WCB shareholders.

“Bega Cheese is pleased its takeover offer for WCB has facilitated the competitive takeover process and created significant value for WCB shareholders,” it said in a news release posted with the Australian Stock Exchange.

Bega, which is Warrnambool’s largest shareholder, said it will “consider its options regarding its strategic shareholding in WCB.”

Bega could become king maker, helping Saputo or its remaining Australian rival, Murray Goulburn, to gain majority control, by selling its 18.42 per cent of Warrnambool’s nearly 56 million shares.

Saputo and Murray Goulburn each have about 17 per cent of WCB’s stock.

Japanese conglomerate Kirin, which owns Lion, controls nearly 10 per cent.

Bega’s holding has more than doubled in value to nearly AU$100-million, a large amount for a small company which earned AU$15.9-million on AU$491-million of revenues last year.

Murray Goulburn says its AU$9.50 cash offer is superior to Saputo’s, which has a range from AU$9 to AU$9.60 depending on how much the Canadian company acquires.

Saputo and WCB’s board have noted that Murray Goulburn’s offer is conditional on obtaining approval from Australia’s competition tribunal, while Saputo’s bid doesn’t face that hurdle.

Saputo sweetened its offer this week following a ruling by Australia’s takeovers panel.

The Montreal-based company said it is maintaining its base offer at AU$9 per share if it doesn’t get a majority of WCB’s stock but would pay up to 6.7 per cent more.

Saputo maintained its offer of AU$9.20 per share if it gets a simple majority, a condition included in the previous bid.

However, it also agreed to pay AU$9.40 per share if it gets 75 per cent of the total and AU$9.60 per share if it gets at least 90 per cent of WCB’s stock.

The offer values Warrnambool at up to AU$537-million or about C$510.1 million at current exchange rates, if Saputo pays the maximum.

However, to reach that threshold, Saputo would have to acquire some or all of the shares currently owned by Murray Goulburn.

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