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The race for takeover of Australia’s oldest dairy company, Warrnambool Cheese and Butter Factory (ASX:WCB), still looks very far from the finish line with one Canadian and two Australian firms bidding to gain control over the company. This has been the status since September 2013 when the initial offer of takeover was announced.
The battle for control over Warrnambool stands as one of the most historic strategic corporate battle in the Australian dairy sector, with three companies competing to boost their market share by acquiring WCB. Over the last two months the bidders have been constantly revising their bids to win and enhance their value for shareholders.
Murray Goulburn Cooperative Co Ltd, the biggest milk producer in Australia, and Bega Cheese ltd are the two Australian firms vying to acquire Warrnambool along with the Canadian dairy giant Saputo Inc. (TSX: SAP). Both Murray Goulburn and Bega Cheese ltd hold 17 percent and 18 percent respectively in Warrnambool Cheese and Butter Factory (WCB).
According to Bloomberg, Murray Goulburn’s Managing Director Gray Helou said that the merger of Warrnambool and Murray Goulburn will create “a globally competitive dairy foods company 100 percent controlled by farmers.”
Warrnambool Cheese and Butter Factory Co. Ltd was established in 1888 and is the oldest diary company in Australia with a long-standing tradition of producing high quality dairy products. It was listed on the Australian Stock Exchange in 2004.
Montreal-based Saputo Inc. offered $9.20 per share as their takeover bid, valuing the company at $515 million, but recently Australian Murray Goulburn inched up their offer to a surprising $9.50 per share, 30 cents higher than their Canadian rival. Saputo Inc. currently holds 9.65 percent of Warrnambool.
Murray Goulburn boosted its takeover offer by 5.6 percent to a $9.50 per share, valuing WCB at $533 million, but it needs approval from the Australian Competition and Consumer Commission before they can proceed.
Meanwhile Bega Cheese is trailing behind in the bidding battle after its stock-and-cash offer failed to mesmerize WCB, the final proposal of 1.5 shares and $2 cash worth $8.975. Bega Cheese is actually undervaluing WCB compared to offers by rival bidders. However, first takeover bid for WCB was announced by Bega Cheese in September 2013.
According to Business Spectator, Saputo’s market value is C$9.4 billion and it has $888.6 million left on its credit lines. The Montreal-based company’s financial fire powers far surpass its rival bidder’s power to acquire WCB.
If Saputo Inc. successfully strikes the deal to acquire WCB, then Saputo will gain a considerable advantage in Australia and globally in the dairy sector, since the diary industry in the country ranks the third largest rural industry with a production value approaching $4 Billion. Saputo Inc., currently operates in USA, Canada and Argentina reaching over 40 countries.