The battle for Victorian-based dairy company Warrnambool Cheese and Butter (WCB) continues to heat up as Australian dairy co-operative Murray Goulburn has announced a revised takeover offer, increasing its bid for WCB to $9 cash per WCB share.

Meanwhile, the WCB takeover offer from Canadian dairy company Saputo has been given the green light by the Australian Foreign Investment Review Board and the Federal Treasurer, Joe Hockey.

Murray Goulburn revised offer pushes WCB value up

The revised offer from Murray Goulburn for $9 cash per WCB share values WCB at $505 million.

On 8 October 2013, WCB announced that it had entered into a Bid Implementation Deed with Saputo for a recommended off-market takeover bid to acquire all WCB shares for $7 cash per WCB share. On 25 October 2013 the Saputo offer was increased to $8 cash per WCB share. Australian dairy companies Bega Cheese and Murray Goulburn have also made takeover offers for WCB. Australian Food News reported earlier in November 2013 that acquisition of Bega shares by New Zealand dairy giant Fonterra could signal a power shift in the battle for WCB takeover.

Highlights of Murray Goulburn’s revised offer

Murray Goulburn said its revised offer represented:

• 100 per cent premium over the closing price of $4.51 per WCB share on ASX on 11 September 2013, the last trading day prior to the announcement of the offer by Bega

• 13 per cent premium to Saputo Inc.’s (Saputo) revised $8.00 cash per share offer announced to ASX on 25 October 2013

• 24 per cent premium to the implied value of Bega’s offer, based on the closing price of Bega shares on ASX on 12 November 2013.

Murray Goulburn said its revised offer is fully funded with Murray Goulburn having secured debt facilities from its existing financiers National Australia Bank Limited (NAB), Australia and New Zealand Banking Group Limited (ANZ) and Westpac Banking Corporation (WBC).

“Murray Goulburn remains firmly committed to acquiring WCB,” said Gary Helou, Murray Goulburn Managing Director. “A combined Murray Goulburn and WCB will create a globally competitive dairy food company which will deliver many opportunities for Australian dairy farmers and their communities,” he said.

“WCB suppliers joining the enlarged co-operative will benefit from co-operative ownershiop focused on maximsiing farm-gate milk prices, including being able to participate in any future changes to Murray Goulburn’s capital structure that may arise as a result of teh review that was recently announced to Murray Goulburn suppliers,” Mr Helou said.

Murray Goulburn intentions for WCB

Murray Goulburn said it was “committed to growing the combined Murray Goulburn/WCB business including providing opportunities for employees in a larger business, delivering enhanced value to existing WCB suppliers and continuing to support local communities”.

Murray Goulburn said it plans to invest capital to optimise and upgrade processing assets in Western Victoria including WCB’s existing Allansford facility. Murray Goulburn also said it saw an opportunity to maintain and extend existing joint venture and contractual relationships with current partners in the WCB business.

WCB has advised its shareholders to take no action on the Murray Goulburn revised offer until WCB’s Directors have issued a formal response to the revised proposal.

Saputo offer given green light by Government

The revised offer from Murray Goulburn comes after the offer $450 million takeover offer from Canadian dairy company Saputo for WCB was approved by both the Australian Foreign Investment Review Board (FIRB) and the Federal Treasurer, Joe Hockey.

“The future ownership of WCB is ultimately a matter for the shareholders, but this decision provides certainty in relation to Saputo’s bid,” said Joe Hockey, Federal Treasurer. “Australia is open for business and we welcome foreign investment when it is not contrary to the national interest,” he said.

Before today’s revised Murray Goulburn offer, WCB was also still recommending that its shareholders accept Saputo’s offer, with its Target’s Statement released Tuesday 12 November 2013. The Target Statement confirmed the intention of each of WCB’s Directors and Senior Executives to accept Saputo’s offer for all WCB shares they hold or otherwise control, in the absence of a superior proposal.

The Target’s Statement has been served on Saputo and lodged with the Australian Securities and Investments Commission.

In its Target’s Statement, WCB said its Board had “carefully considered” the offer from Saputo and identified six key reasons why shareholders should accept Saputo’s offer.

1. The Offer Consideration under Saputo’s Offer is a substantial premium to recent trading prices of WCB Shares prior to the announcement of Bega’s Offer and is higher than the offer consideration under Bega’s Offer and Murray Goulburn’s Proposal respectively.

1. Saputo’s Offer is a higher all cash offer and so provides greater certainty of value than Bega’s Offer.

3. There is potential additional value of up to $0.56 per Share from the distribution of franking credits for some WCB Shareholders.

4. The Offer Consideration under Saputo’s Offer is above the valuation range for WCB Shares as assessed by the Independent Expert for Bega’s Offer.

5. Saputo’s Offer is subject to fewer and less restrictive conditions than Bega’s Offer and is more certain than Murray Goulburn’s Proposal.

6. Saputo’s Offer provides more certainty for the future of WCB’s operations and employees including a strong future competitor for milk supply.