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 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 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 will be discussed at an upcoming board meeting.
Bega Cheese might increase its offer to strengthen its position in the bidding war and to compete more effectively with Saputo's higher cash offer.
Bega Cheese is contemplating increasing its offer to make it more competitive against Saputo's and Murray Goulburn's bids. Analysts have suggested that raising the offer might not be necessary, but the board will discuss this option.
Fonterra's purchase of a 6% stake in Bega Cheese has added credibility to Bega's bid, indicating that Bega is Fonterra's preferred partner in Australia.
Fonterra's recent purchase of a 6% stake in Bega Cheese has strengthened Bega's bid for WCB, indicating Fonterra's preference for Bega as a partner in Australia.
Saputo's bid is contingent on gaining clearance from the Foreign Investment Review Board and acquiring 51% of the company, which is challenging given the existing stakes held by Bega, Murray Goulburn, and Kirin.
Bega Cheese's bid is valued at $7.77 per share, Saputo's all-cash offer is $8 per share, and Murray Goulburn's offer is $7.50 per share.
Bega Cheese's offer is valued at $7.77 per share, which is below Saputo's $8 cash offer but above Murray Goulburn's $7.50 cash offer.
Bega Cheese has no opposition from the competition regulator for its merger with WCB. Murray Goulburn is awaiting regulatory approval, while Saputo's offer depends on clearance from the Foreign Investment Review Board and acquiring 51% of WCB.
Bega Cheese's merger with Warrnambool Cheese & Butter has no opposition from the competition regulator, while Murray Goulburn is awaiting regulatory approval and Saputo needs clearance from the Foreign Investment Review Board.
The ownership structure poses a challenge for Saputo, as Bega and Murray Goulburn each own 17% of WCB, and Kirin owns 10%. Saputo needs to secure 51% ownership, making it a tough task.
Market volatility affects the perceived value of Bega Cheese's shares, which is a concern for Warrnambool Cheese & Butter's shareholders when considering Bega's offer.
Fonterra recently acquired the Tasmanian yoghurt company Tamar Valley Dairy, which is a supplier to Fonterra. This acquisition is separate from Bega Cheese but highlights Fonterra's active role in the dairy industry.
Bega Cheese is seen as being in a strong position due to its competitive offer, support from Fonterra, and the lack of regulatory opposition to its merger with Warrnambool Cheese & Butter.
WCB's chief executive, David Lord, warned that Bega Cheese's current share price might not represent its fundamental value due to market volatility, suggesting that investors should consider this when evaluating the bid.
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