Competition for WCB ownership heats up, share price climbs after offer from Canadian dairy processor
The Board of Victorian-based dairy company Warrnambool Cheese and Butter Factory (WCB) has unanimously recommended that its shareholders accept a takeover bid from Canadian dairy company Saputo.
The offer from Saputo would pay $7 per share for all the shares in WCB. Saputo has agreed with WCB that the Australian dairy company may declare and pay fully franked special dividends of up to a maximum of $1.31 per WCB share, with a corresponding reduction in the offer price, upon Saputo reaching specified relevant interest thresholds in WCB. This would enable WCB to be up to an additional AU$0.56 per share depending on the individual tax circumstances of each WCB shareholder.
The special dividends would comprise two parts:
- If Saputo obtains an interest of at least 50.1 per cent in WCB, WCB may pay an initial fully franked dividend of up to $0.46 per share
- If Saputo obtains an interest of at least 90 per cent in WCB, WCB may pay an additional fully franked dividend of up to $0.85 per share, or such amount to that the total of the initial and additional dividend is up to $1.31 per share
The WCB Board said it recommended that shareholders accept the offer, in the absence of a superior proposal. It said each WCB Director and Executive intends to accept the offer for all of the WCB shares they hold or otherwise control.
WCB share price jumps after Saputo offer
WCB shares have soared after its recommendation to accept the $392.7 million takeover bid from Saputo. At 1450 AEDT, shares in the group were 11.46 per cent higher at $7.20, against a benchmark fall of 0.35 per cent.
Saputo says its offer is “compelling” and “superior” to Bega Cheese offer
Saputo said its offer is “highly compelling” for WCB shareholders because, excluding any additional value related to the distribution of franking credits, the all cash offer price of $7 per share under Saputo’s offer represents:
- A 21 per cent premium to the implied value of the offer announced by Bega Cheese on 12 September 2013 of $5.78 per share on 11 September 2013, being the last trading day before the Bega offer was announced
- An 11 per cent premium to the implied value of the Bega offer of $6.30 per share, based on the closing price of Bega shares on 7 October 2013
- A 62 per cent premium to WCB’s volume weighted average price of $4.33 per share over the three months before the Bega offer was announced
- A 55 per cent premium to WCB’s closing price of $4.51 per share on 11 September 2013, being the last trading day before the Bega offer was announced
Saputo said its offer is subject to minimal conditions including approval from the Australian Foreign Investment Review Board (FIRB) and a minimum acceptance condition of greater than 50 per cent of WCB shares.
Saputo said it believed its offer was superior to the Bega offer, with Saputo offering WCB shareholders a higher offer price, the certainty of 100 per cent cash for their shares and fewer conditions than the Bega offer. Australian Food News reported in September 2013 that WCB’s Board had unanimously recommended shareholders reject the offer from Bega.
Saputo to make WCB centre of its Asia Pacific operations
Saputo said its strategy for acquiring WCB was to position WCB as the centre of its operations in Australia and the main platform from which to service the demand for dairy products in the Asia Pacific region.
The Canadian Company said it believed it “can greatly assist WCB’s future development and accelerate its growth, nationally as well as internationally”.
Rothschild and Rabobank are acting as the financial advisers to Saputo, and Maddocks and Stikeman Elliot are its legal advisors.
Saputo is a Canadian-based dairy company that produces, markets and distributes a wide variety of dairy products, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products and dairy ingredients. It is one of the top ten dairy processors globally, the largest in Canada, the third largest in Argentina and among the top three cheese producers in the US.
Its products are sold in more than 40 countries under brand names such as Saputo, Alexix de Protneuf, Armstrong, Baxter, Dairyland, Dragone, DuVillage 1860, Friendship, Frigo Cheese Heads, Great Midwest, King’s Choice, Kingsey, La Paulina, Milk2Go, Neilson, Nutrilait, Ricrem, Salemville, Stella and Treasure Cave.
Australian Food News reported earlier this week that WCB had announced it expected its profits to double in the 2014 financial year.
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