Bega chairman patient on Warrnambool

Bega Ltd chairman Barry Irvin says the company’s board feels no pressure at present to improve its $7.82 takeover offer for Warrnambool Cheese & Butter Factory Ltd - but it could move quickly to materially improve its offer if rivals Murray Goulburn Co-operative Ltd and Saputo Inc do.

“There is still value in waiting and observing the unfolding nature of the Warrnambool bidding process,” Irvin told DataRoom. “Our view is that everybody, Murray Goulburn and Saputo, are reflecting on their position. The Bega board is fully informed and is agile enough to move quickly.”

Bega’s takeover offer of 1.2 of its shares plus $2 cash is superior to Murray Goulburn’s $7.50 cash offer but less than Saputo’s $8 cash offer.  

Irvin says his company’s share price of $4.85 as of 1507 AEST puts it “in the zone of Saputo’s bid” and the takeover battle for Warrnambool is proof of the attractiveness of Australian dairy assets. He rejected analysis the 54 per cent rise in Bega’s share price since its September 12 bid for Warrnambool is unsustainable.

The New South Wales company is trading at about 11.8 times forecast 2014 enterprise value divided by earnings before interest, tax an depreciation compared with a median for its peer group of 7.5 times, according to analysis from a Bega competitor.

“This bidding process is bringing about a re-rating of the sector and industry,” says Irvin. “The market is recognizing the merits of our offer as evidenced by Fonterra’s decision to buy a 6 per cent stake of Bega and Lion buying 9.99 per cent of Warrnambool last week.

“This is all part of a continuing effort that recognises the value of Warrnambool and identifies the opportunity that a merger would bring,” he says. “The reality is that people have bids for Warrnambool that may be executed.”

Warrnambool shares were $8.55 at 1507 AEST.