Another party joins battle for Warrnambool Cheese and Butter

Posted by Daniel Palmer on 24th December 2009

ASX-listed dairy firm Warrnambool Cheese and Butter has received another approach from their suitor, while a new player has entered the mix – potentially fuelling a bidding war.

WCB first received a non-binding offer back in October from an undisclosed suitor and quickly dismissed the offer – arguing it grossly undervalued the company’s prospects. The company has since received two further approaches – one from a new suitor –  but have again been dismissive of the offers.

“WCB has received a revised proposal from the same party that submitted a proposal on 20 October 2009,” they advised in a statement. “The revised proposal was received on 17 December 2009 and requested WCB to respond before Christmas.”

“In addition, a further proposal was received from a new third party on 8 December 2009.”

Both of the proposals were unsolicited, they said, and valued the company (whose shares hover around $2.75) at around or just under $4 per share. Despite the significant premium to the share price, the company’s Board believes that they are “opportunistic” and are recommending shareholders disregard any offers they receive.

On the up

In the same statement, WCB took the opportunity to report on the improvements in trading conditions in recent months, which they believe add further weight to their claims of undervaluation.

The company is on track to process record volumes at their manufacturing plant, improving cost efficiencies and boosting profits. A surge in dairy prices in the past couple of months has also assisted the company, while a renewed focus on higher margin products is “beginning to have a material positive impact on WCB’s financial result.” Their Sungold brand and joint venture with Royal Friesland Campina were cited as two particular growth areas for the business.

WCB management are adamant they have “turned the corner” after a tumultuous year and are now forecasting a profit for the 2010 financial year – a substantial improvement on last year’s $20 million loss.