Bega holds firm on WCB offer

Bega Cheese will not lift its takeover offer for Warrnambool Cheese and Butter (WCB) for now, despite a higher competing bid from Canadian suitor Saputo.

By InvestSMART · 12 Oct 2013

By InvestSMART ·
12 Oct 2013

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Bega Cheese will not lift its takeover offer for Warrnambool Cheese and Butter (WCB) for now, despite a higher competing bid from Canadian suitor Saputo.

Bega said on Friday that it intends to proceed with its offer to WCB shareholders, but "does not presently intend to increase its offer consideration although it reserves the right to do so".

Bega said its offer of 1.2 Bega shares and $2 in cash, which valued WCB at $360.4 million on October 10, represented excellent value.

Bega said it was comfortable with its present offer to merge with WCB based on its view that a strong Australian-owned and listed dairy company would improve returns for shareholders and dairy farmers.

"Some [WCB] shareholders will prefer to be shareholders of an Australian dairy company and support Bega Cheese's vision for the combined group and the synergies that will come from it," Bega said in a statement to the Australian Securities Exchange.

On October 8, Canadian dairy giant Saputo launched a $390 million takeover bid for WCB, at $7 per WCB share.

Shares in WCB closed up 5¢ at $7.27. Bega shares were 12¢ higher at $3.82.

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Frequently Asked Questions about this Article…

What takeover offer has Bega Cheese made for Warrnambool Cheese and Butter (WCB)?

Bega Cheese has offered 1.2 Bega shares plus $2 in cash for each WCB share. Bega said that offer valued WCB at $360.4 million as at October 10 and described it as excellent value.

Why is Bega Cheese not increasing its takeover offer for WCB right now?

Bega says it intends to proceed with its offer but does not presently intend to increase the offer consideration. It does, however, reserve the right to increase the offer in future.

Who launched the competing bid for WCB and what is that offer worth?

Canadian dairy company Saputo launched a competing takeover bid on October 8 valued at $390 million, making an offer of $7 per WCB share.

How did WCB and Bega shares move after the takeover bids were announced?

WCB shares closed up 5¢ at $7.27, while Bega shares were 12¢ higher at $3.82 following the takeover activity.

How does Bega justify its bid for WCB — what benefits does it claim?

Bega says its proposed merger would create a strong Australian-owned and listed dairy company, which it believes will improve returns for shareholders and dairy farmers and deliver synergies for the combined group.

Does Bega reserve the right to change its offer for WCB later?

Yes. Although Bega does not currently intend to increase its offer, it has stated that it reserves the right to do so.

What valuation difference should investors note between the Bega offer and Saputo’s bid?

Bega’s offer valued WCB at $360.4 million on October 10 (via 1.2 Bega shares plus $2 cash per WCB share), while Saputo’s competing bid was $390 million at $7 per WCB share as announced on October 8.

What factors might WCB shareholders consider when choosing between Bega’s and Saputo’s offers?

According to the companies’ public statements, shareholders may weigh the financial value of the offers alongside non-financial factors — for example, Bega highlights the appeal of being part of an Australian‑owned, listed dairy company and the potential synergies and returns that could follow from the merger.