Global interest in Warrnambool dairy processor, acquisition speculation grows

Posted by AFN Staff Writers on 6th January 2014

Interest in Victorian dairy company Warrnambool Cheese and Butter (WCB) has attracted a new potential bidder, according to media reports.

There is speculation that Chinese state-owned China Investment Corporation is interested in WCB and may step into the bidding war.

Canadian dairy company Saputo has a $9 per share offer for WCB that is due to expire Friday 10 January 2014, though there is speculation that deadline could be extended.

The WCB Board has unanimously recommended that shareholders accept Saputo’s offer, despite a $9.50 per share offer from Australian dairy co-operative Murray Goulburn. The Murray Goulburn offer is conditional on approval from the Australian Competition Tribunal.

Another Australian dairy company, Bega, dropped out of the bidding war in December 2013.

Final Saputo Offer

On 17 December 2013 Saputo issued its Third Supplementary Bidder’s Statement giving effect to the terms set out below as part of the undertaking given by Saputo to the Takeovers Panel.

The principal terms of Saputo’s Final Offer include:

  • an unconditional offer of $9.00 cash per WCB share payable within 5 Business Days of processing of acceptances by Saputo;

  • Saputo will increase its Offer Consideration by $0.20 cash per Share ($9.00 to $9.20) if Saputo acquires a relevant interest in greater than 50% of WCB Shares during its offer period;

  • Saputo will increase its Offer Consideration by a further $0.20 cash per Share ($9.20 to $9.40) if Saputo acquires a relevant interest in greater than 75% of WCB Shares during its offer period;

  • the offer period will end at 7.00pm (Melbourne time) on 10 January 2014, unless extended further in accordance with the Corporations Act;

  • withdrawal rights will be offered to and confirmations sought from all WCB shareholders who accepted the Saputo Offer on or before 17 December 2013 (Affected Shareholders). If the withdrawal right is not exercised by 3 January 2014, the acceptance will be deemed to be confirmed and payment will be made by 10 January 2014. If an Affected Shareholder confirms their acceptance before 3 January 2014 they will receive their payment within 5 Business Days of receipt of their confirmation;

  • all acceptances dated and received by Saputo after 17 December 2013 will be paid within 5 Business Days of Saputo processing them.

WCB December trading update

Further to WCB’s trading update on 2 October 2013, WCB advised in December 2013 that it estimated an approximate 100 per cent increase in half year earnings before interest, tax and depreciation and amortisation (EBITDA) for the six months to 31 December 2013, compared with EBITDA for the previous corresponding six month period to 31 December 2012 of $29.3 million.

As foreshadowed in October 2013, WCB said the improved market conditions experienced in the last quarter of the 2013 financial year had continued into the 2014 financial year.

“Strong international dairy commodity demand and pricing, a depreciating Australian dollar and a continued focus on business improvement, product mix and strategic initiatives are contributing to the improved result,” said David Lord, WCB CEO.

“This excellent first half result provides a robust foundation for the balance of the 2014 financial year,” said Terry Richardson, WCB Chairman. “Overall earnings are in line with the guidance for the full 2014 financial year we gave the market in October, allowing for further anticipated movements in commodity and milk pricing,” he said.

“This expected improved result for the first half as well as for the full year is likely to be reflected in the usual January milk price review,” Mr Richardson said.

WCB expects to release its interim results on 28 February 2014.

Acquisition speculation around WCB is growing