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Battle for dairy group enters the 'silly zone'

Saputo is risking its reputation as a "disciplined acquirer" as the battle for Warrnambool Cheese & Butter enters the "silly zone", according to Canadian analysts.
By · 3 Dec 2013
By ·
3 Dec 2013
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Saputo is risking its reputation as a "disciplined acquirer" as the battle for Warrnambool Cheese & Butter enters the "silly zone", according to Canadian analysts.

The North American dairy dynamo is locked in a three-way bid for WCB with Murray Goulburn - Australia's biggest dairy company - and NSW-based Bega Cheese.

On Friday, the Australian Takeovers Panel banned Saputo from buying WCB shares for at least two months after Murray Goulburn protested that the Montreal-based company had "misinformed" shareholders about the true value of its bid.

Despite the latest hurdle, Canadian analysts say the bidding war has become "political" and "dangerous".

Murray Goulburn increased its bid to $9.50 a share cash, trumping Saputo's $9.20 and fuelling speculation the price tag could rise close to $10 a share.

But fund manager John Stephenson, of First Asset Investment in Toronto, said Saputo investors were becoming jittery.

"I think it's starting to get to the silly zone where the deal dynamics are driving this," he said, adding anything above a 10¢ rise would be "a bit of a worry".

"They can probably make this work at $9.50 or maybe $9.60, but if they are going to chase this up to $10, I think that's crazy."

Saputo has limited growth opportunities in Canada and is planning to use WCB as its entry point into Australia and the lucrative Asia-Pacific market.

It has been patient, eyeing WCB for the past 12 years. It was only when Bega Cheese ignited the takeover battle in September that Saputo made its move, first with $7 a share offer, before the bidding war went into overdrive.

Mr Stephenson said while Saputo's expansion made sense, the competition from Murray Goulburn pitching itself as a farmer-owned alternative had become political "and that's a little dangerous".
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Frequently Asked Questions about this Article…

The bidding war for Warrnambool Cheese & Butter has entered what analysts are calling the 'silly zone,' with Saputo, Murray Goulburn, and Bega Cheese all vying for control. The Australian Takeovers Panel has temporarily banned Saputo from buying shares, adding complexity to the situation.

Saputo is interested in acquiring Warrnambool Cheese & Butter to establish a foothold in Australia and the lucrative Asia-Pacific market. With limited growth opportunities in Canada, this acquisition is seen as a strategic move for expansion.

The bidding war has put Saputo's reputation as a 'disciplined acquirer' at risk. Analysts have expressed concerns that the escalating bids could lead to overvaluation, potentially impacting investor confidence.

Saputo investors are becoming jittery as the bidding war intensifies. There is concern that chasing the bid price up to $10 per share could be excessive and financially risky.

Murray Goulburn has increased its bid to $9.50 per share, surpassing Saputo's offer of $9.20. This move has fueled speculation that the bidding price could rise even further.

Bega Cheese initiated the takeover battle in September, prompting Saputo to make its move. Bega's involvement has intensified the competition among the three companies vying for Warrnambool Cheese & Butter.

The bidding war has become 'political' due to Murray Goulburn pitching itself as a farmer-owned alternative. This adds a layer of complexity and risk, as political dynamics can influence the outcome and stability of the acquisition process.

The Australian Takeovers Panel's decision to ban Saputo from buying Warrnambool Cheese & Butter shares for two months is significant as it temporarily halts Saputo's acquisition efforts, giving competitors like Murray Goulburn and Bega Cheese an opportunity to strengthen their positions.