Saputo worth $10 billion. MG worth less than $1 billion. WCB directors to keep their jobs under Saputo arrangement. Good test case for National Competition regulations and public sentiment coming soon.
Cui bono?
DYOR
It's time for WCB shareholders to act, Canada's Saputo says
REBECCA URBAN The Australian January 11, 2014 12:00AM
WARRNAMBOOL Cheese & Butter suitor Saputo has launched a last-ditch attempt to entice shareholders to accept its $500 million-plus takeover offer, extending its bid for a further 12 days but declaring it final.
Saputo, which has so far amassed just over 21 per cent of shares in the local dairy processor, warned that the time had come for shareholders to "take action immediately" by accepting its offer.
"Our offer is highly attractive, it represents more than a 100 per cent takeover premium, and could eventually represent even more," Saputo boss Lino Saputo Jr said in a statement yesterday.
"An acquisition of Warrnambool by Saputo would represent an excellent outcome for both the Warrnambool shareholders and for the long-term future of WCB."
But despite the Canadian's appeal, almost $4.5m worth of Warrnambool shares were traded on the market yesterday, causing the stock price to climb to $9.21. The previous day, $4.7m changed hands at about $9.15 a share.
Saputo is offering just $9 a share to acquire the company. However, that is set to rise to $9.20 should it secure 50 per cent of the company and to $9.60 upon achieving 90 per cent.
But with rival bidder Murray Goulburn urging Warrnambool investors to delay making a decision until the outcome of its Australian Competition Tribunal hearing and major shareholders Bega Cheese and Lion believed to be reluctant to welcome a new competitor into the local market, whether Saputo can get to the 50 per cent stake it requires to win control is uncertain.
Bega chairman Barry Irvin said yesterday that his board had yet to decide what to do with its 18.8 per cent shareholding in the company that has more than doubled in value to $97m.
Bega was also bidding for Warrnambool until recently.
Analysts suggested that it was possible that the extraordinary, four-month takeover battle could result in a stalemate with each of Saputo, Bega, Murray Goulburn and the Japanese-backed Lion, which last year took a 10 per cent stake to protect a commercial arrangement, holding large but non-controlling positions on Warrnambool's register.
The bulk of Saputo's acceptances so far have come in from directors and related entities, dairy farmer suppliers and retail investors. Hedge funds are thought to control about 15 per cent of Warrnambool's register.
Cannacord Genuity analyst Mark Topy pointed to the recent on-market trading, noting the millions of shares that were "not going to Saputo".
"I'm intrigued as to who's in there buying shares," Mr Topy said.
"Someone has taken the view that there's going to be further action in Warrnambool and the game is not over.
"For the farmers who've yet to accept, why would they take $9 from Saputo when they can get around $9.20 on the market."
While Murray Goulburn, which has a 17.7 per cent stake in Warrnambool, has reserved its right to beef up its holding, sources close to the company denied that it was behind the recent trading. It was not clear last night whether Lion had been in the market.
While the outcome of Murray Goulburn's tribunal hearing -- and whether or not it can formalise its $9.50 cash proposal into a bid -- will not be known until the end of next month, all eyes will be on Bega to see if it accepts Saputo's bid.
Bega, which is considered a takeover target in its own right, has made no secret of the fact that it has been shopping around its stake to potential Asian buyers.
However, it has yet to receive a formal offer.
"Given Saputo's extension, we'll continue to think about the options available to us," said the company's chairman, Barry Irvin.
"We haven't concluded that process yet. We're still managing inquiries in regards to our stake."
Mr Irvin acknowledged that Bega stood to make a significant profit on its shares should it accept Saputo's offer. However, the board would make a decision about what was in the best interests of shareholders and suppliers in both the "short and long term".
Warrnambool's board yesterday reiterated its support for the Saputo bid, arguing that it represented greater certainty than Murray Goulburn's proposal.
Meanwhile, Saputo has unwittingly become a catalyst for action by the Takeovers Panel to clarify its position on the treatment of franking credits when calculating the value of offer price in a takeover.
Making reference to the debacle surrounding an earlier and highly complex incarnation of Saputo's bid for Warrnambool, in which the panel intervened, it has released a new guidance note that makes it clear that including the value of franking credits paid by a target company in the "headline" offer price of a bid was likely to give rise to unacceptable circumstances.
It has called for submissions from the public.
WCB Price at posting:
$9.21 Sentiment: Hold Disclosure: Held
