January 16, 2014 / 4:32 AM / 5 years ago

Canada's Saputo on cusp of control in Australia dairy war

SYDNEY (Reuters) - Bega Cheese Ltd (BGA.AX) said on Thursday it would sell its stake in Warrnambool Cheese and Butter Factory Holdings Co WCB.AX, all but handing victory to Canada’s Saputo Inc (SAP.TO) in the battle for Australia’s oldest dairy company.

The sale lifts Saputo to just short of majority control, and is expected to prompt other investors to follow suit. That would allow the Canadian company to claim a win for its base offer of A$515 million ($460 million), ending one of Australia’s most competitive takeover battles in recent years.

Bega’s decision to sell its 18.8 percent stake gives Saputo 45.2 percent of Warrnambool, based on its most recent shareholding disclosure.

“If I was a punter on this, I would be feeling quite happy for adding my money on Saputo winning this,” said Michael Heffernan, senior client adviser at brokerage Lonsec.

The move by Bega leaves rival suitor Murray Goulburn Co-operative Co Ltd with a 17.7 percent stake for now - and little hope of reaching the 50.1 percent stake it needs to make its own A$530 million bid unconditional.

Saputo declined to comment. Murray Goulburn said it would “assess the ramifications” of Bega’s move on both its bid and its shareholding.

The battle for Warrnambool reflects the huge interest in Australia’s agriculture assets amid surging demand from increasingly affluent southeast Asia. Warrnambool’s portfolio includes increasingly popular high-tech milk extracts as well as traditional dairy products.


A total of nine bids and counter-bids since Bega made the first approach in September has made Warrnambool the world’s most expensive dairy company on a price-to-earnings basis. It is trading at 38.2 times its 12 months trailing earnings, according to Thomson Reuters data.

Among Warrnambool’s investors is Japanese beverage giant Kirin Holdings Co Ltd (2503.T), with a 10 percent stake.

Saputo raised the stakes last Friday when it extended its offer until January 22, but said that extension would be final.

Bega said it had decided the risk in continuing to hold its stake was too great, with no guarantee of regulatory approval for the Murray Goulburn bid or any other suitors emerging. Murray Goulburn’s is conditional on clearance by a competition tribunal, with a ruling not due until the end of next month.

“Bega Cheese’s takeover offer was the catalyst for a process which has highlighted the value of the Australian dairy industry, a rerating of Bega Cheese’s share price and a substantial profit for Bega Cheese,” Chief Executive Barry Irvin said in a statement.

Saputo’s unconditional offer rises in increments as more shareholders accept. It will reach a peak value of A$549 million if the company receives acceptances of 90 percent or more.

Warrnambool shares were up 1.3 percent at A$9.40, while Bega were 2.4 percent higher at A$4.70 after the announcement.

Saputo’s offer is based on a scale of acceptances. It rises from A$9.00 per share to A$9.20 on a 50 percent acceptance rate, A$9.40 on 75 percent acceptances and A$9.60 on 90 percent acceptances.

Reporting by Maggie Lu Yueyang and Jane Wardell; Editing by Kenneth Maxwell

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