Murray Goulburn announces bid for WCB

Posted by Daniel Palmer on 29th January 2010

Dairy co-operative Murray Goulburn has announced itself as one of the suitors for the ASX-listed Warrnambool Cheese and Butter as they look at their options after seeing their proposal rejected.

WCB reported in December that they had received an unsolicited takeover offer in October which they rejected. They then updated the market just prior to Christmas with the news that another party had also made a play for them while the original suitor had tabled a revised bid. Both offers reportedly valued the dairy group at just under $4 and were dismissed by WCB – who did not name its suitors.

It has now been confirmed that Murray Goulburn was the original bidder who set the takeover speculation in motion, with the co-operative today sending a letter to their stakeholders highlighting the opportunity of a merger.

“The MGC board believes the proposal represents a fair price both for WCB shareholders and for MGC and its members. We are currently contemplating our next steps,” Chairman Grant Davies said. “At this stage our proposal has not been recommended by the WCB board. However, we believe it is a very attractive proposal for the shareholders and suppliers of WCB.

“We will continue to seek further engagement with Warrnambool Cheese and Butter’s Board to address any issues or concerns that it may have with our proposal.”

Murray intends to keep the WCB brands and company name, but a deal still appears some way off with any bidder hamstrung by an ownership clause that almost certainly means WCB board approval will be required for any deal to go through. And that could prove difficult to get.

WCB shares were up 4 per cent to $3.38 in early afternoon trade.

Update 4:47pm

WCB released a statement to the market after trade this afternoon, again dismissing the merits of any takeover proposals put before them.

“MG’s proposal was not a formal offer to acquire WCB,” they noted. “It was an indicative, non binding approach that was contingent on many conditions; including due diligence on WCB’s business, ACCC approvals, restrictions on WCB normal operations, removal of the shareholder limit in WCB’s Constitution, certain negative movements in the S&P/ASX200 share index and WCB’s share price, unanimous board recommendation of MG’s proposal, $2.5 million break fee and exclusivity.

“As such, MG’s approach was, and still is, incomplete and incapable of being put to shareholders by the WCB Board.”

WCB insisted the bid was opportunistic and not reflective of the dairy firm’s long term prospects. They also indicated that the other bidder – the identity of which remains unknown – had made an informal offer at a higher price.

Shareholders have responded with overwhelming support of the board’s rejection of the offers, the company added, and they currently see “no reason to further engage with MG.”