Bega shareholders approve WCB bid

Shareholders of Bega Cheese (BGA) have voted to allow it to pursue its attempt to acquire Warrnambool Cheese and Butter Factory (WCB) by enabling Bega to issue shares to Warrnambool shareholders.

At Bega’s annual general meeting at the New South Wales town after which the company is named, more than 90% of shareholders voted to allow Bega to issue more than 10 per cent of its stock to Warrnambool shareholders as part of its September 12 offer of 1.2 Bega shares plus $2 cash.

The offer is open until November 28 but if the Australian Competition and Consumer Commission clears Bega’s offer for Warrnambool at the end of this month, Bega is expected to improve its bid.

As at 1312 AEST Bega’s takeover offer was valued at $6.80 compared with the Warrnambool share price of $8.10.

“We are unlikely to have a next move until after the ACCC,” David Williams, Bega’s advisor toldDataRoom.

Canada’s Saputo Inc has offered a $7 cash for Warrnambol, a takeover offer it values at $7.56 once special dividends and franking credits are factored in. On Friday, Murray Goulburn Co-operative Ltd offered $7.50 cash for Warrnambool.

Saputo has to receive clearance from the Foreign Investment Review Board. Murray Goulburn may have problems with the ACCC as perceptions that the regulator would not approve such a takeover may have forced the dairy cooperative to shelve its takeover plans three years ago.

Bega says its total number of shares will increase 26 per cent if it acquires 100 per cent of Warrnambool. The debt and other costs required to fund such a transaction is $95.7 million, while $261.9 million will be paid to Warrnambool shareholders in stock under Bega’s current offer.

A 50.1 per cent stake in Warrnambool would require debt and other costs of $39 million, while $102.3 million in stock will be paid to the Victorian dairy company’s shareholders.   

A Bega-Warrnambool combination would have 1,000 dairy farmers in New South Wales, Victoria and South Australia, have an annual milk intake of 1.6 billion litres, seven manufacturing sits and annual revenue of $1.5 billion.