Bega Cheese ponders tastier offer to tempt WCB to the table
The NSW dairy company is involved in a three-way bidding war for WCB with Murray Goulburn and Canada's Saputo.
Bega adviser David Williams, of Kidder Williams, said he expected Bega's board to meet on Thursday afternoon, when it will discuss two aspects of the bid. "A, is whether we go completely unconditional, and B is whether we need to increase the bid," Mr Williams said.
Analysts were tipping Bega to raise its offer of $2 cash plus 1.2 Bega shares, but Mr Williams said that might not be necessary.
The value of Bega's bid rose above $450 million last week after New Zealand dairy operator Fonterra bought 6 per cent of the company.
Analysts said the Fonterra raid gave Bega's offer more clout. "Fonterra investing in Bega rather than Warrnambool shows that Bega is their favoured partner here in Australia," PAC Partners agribusiness analyst Paul Jensz said.
But WCB chief executive David Lord warned shareholders that Bega's current share price didn't represent its fundamental value and was subject to market volatility.
Bega's shares dropped 3.2 per cent on Wednesday, valuing the bid at $7.77 a share, 23¢ below Saputo's all cash offer of $8 a share but above Murray Goulburn's $7.50 cash a share.
"We're already up there with Saputo, we're above Murray Goulburn. We're in the box seat," Mr Williams said.
In Bega's favour is that the competition regulator has said it will not oppose a Bega merger with WCB.
Murray Goulburn is still awaiting regulatory approval and Saputo's offer is dependent on clearance from the Foreign Investment Review Board. Saputo must also gain 51 per cent of the company, a tough task considering Bega owns 17 per cent, Murray Goulburn another 17 per cent, and Japanese dairy and drinks group Kirin 10 per cent.
"You'd have to say that the Australians have their noses ahead in that game at this point," Mr Jensz said.
Bega's board meeting comes after Fonterra bought Tasmanian yoghurt company Tamar Valley Dairy out of administration on Wednesday for an undisclosed price. Fonterra is a supplier to Tamar Valley Dairy. The deal includes processing equipment, intellectual property and trademark.
Frequently Asked Questions about this Article…
Bega Cheese is considering raising its bid for Warrnambool Cheese & Butter (WCB) as part of a three-way bidding war with Murray Goulburn and Canada's Saputo. The decision is expected to be made after a board meeting.
Bega Cheese is considering whether to raise its bid for Warrnambool Cheese & Butter (WCB) as part of a three-way bidding war with Murray Goulburn and Canada's Saputo. The decision is expected to be made after a board meeting.
Bega Cheese's offer currently values WCB at $7.77 per share, which is above Murray Goulburn's $7.50 cash offer but below Saputo's $8 all-cash offer.
Bega Cheese's offer is valued at $7.77 per share, which is above Murray Goulburn's $7.50 cash offer but below Saputo's all-cash offer of $8 per share.
Fonterra's purchase of a 6% stake in Bega Cheese increased the value of Bega's bid to over $450 million, giving it more credibility and positioning Bega as Fonterra's favored partner in Australia.
Fonterra's investment in Bega Cheese increased the value of Bega's bid to over $450 million and provided additional credibility, as it indicates Fonterra's preference for Bega as a partner in Australia.
Bega Cheese's merger with WCB faces no opposition from the competition regulator. However, Murray Goulburn is awaiting regulatory approval, and Saputo's offer is contingent on clearance from the Foreign Investment Review Board and acquiring 51% of WCB.
Bega Cheese has no opposition from the competition regulator for its merger with WCB. However, Murray Goulburn is still awaiting regulatory approval, and Saputo's offer is contingent on clearance from the Foreign Investment Review Board and acquiring 51% of WCB.
Despite analysts predicting a higher offer, Bega Cheese's adviser, David Williams, mentioned that increasing the bid might not be necessary, as Bega is already competitive with Saputo and above Murray Goulburn.
WCB's chief executive, David Lord, warned shareholders that Bega's current share price does not reflect its fundamental value and is subject to market volatility, which could impact the attractiveness of Bega's offer.
Saputo must gain 51% of WCB, which is challenging given that Bega and Murray Goulburn each own 17%, and Kirin owns 10% of the company.
Bega Cheese is in a strong position because it already owns 17% of WCB, and the competition regulator has not opposed its merger with WCB, giving it a potential edge over its competitors.
Bega Cheese's share price dropped by 3.2%, affecting the valuation of its bid. WCB's CEO, David Lord, cautioned shareholders about the market volatility impacting Bega's share price.
The involvement of international companies like Canada's Saputo and Japan's Kirin adds complexity to the bidding process, as Saputo needs to gain 51% ownership, which is challenging given the existing stakes held by Bega, Murray Goulburn, and Kirin.
Fonterra recently acquired the Tasmanian yoghurt company Tamar Valley Dairy out of administration, which includes processing equipment, intellectual property, and trademark.
Fonterra recently acquired the Tasmanian yoghurt company Tamar Valley Dairy out of administration. This acquisition is separate from Bega Cheese but highlights Fonterra's active role in the Australian dairy industry, which indirectly supports Bega's position.
Call 1300 880 160
Start a chat
Schedule a call
