Bega willing to wait on WCB

Bega Cheese (BGA) chairman Barry Irvin says he’s willing to be patient in his ambitions to acquire Warrnambool Cheese and Butter Factory (WCB), but if Bega acquires a fifth or more of its target, it should be offered a seat on Warrnambool’s board.

Irvin says Bega’s current shareholding is 17% but Warrnambool has not entered into any discussions with Bega apart from rejecting the takeover offer. Murray Goulburn Co-operative Ltd, which has an 18% Warrnambool stake, has not spoken with Bega about its offer, Irvin adds.

“I hope we can sit down with Warrnambool and talk about what the best board composition will be,” Irvin told DataRoom. “With a shareholding of 20% or more, we would look to have some level of input.”

Warrnambool did not respond to a request for comment. Murray Goulburn declined to comment.

Bega sent letters asking for acceptance of its offer to Warrnambool shareholders last week. Apart from Bega and Murray Goulburn’s stakes, which together account for about 35% of Warrnambool shares, farmers who supply Warrnambool product own about 40% of the company. The remaining 25% of Warrnambool is largely owned by individual investors.

Irvin says Bega “has made a very good offer” and is not considering raising its offer for Warrnambool, despite its takeover offer now being less than Warrnambool’s current share price.

Bega is offering 1.2 of its shares plus $2 cash for Warrnambool. As of 1228 AEST, Bega’s offer values Warrnambool at $6.36, compared with Warrnambool’s share price of $6.43.

“At this point, we’re comfortable where we’re at,” said Irvin.

Boutique advisory firm Kidder Williams is advising Bega.

The Bega chairman adds he’s willing to be patient with regard to Warrnambool.

“We’re positioning ourselves for the future,” says Irvin. “There will be consolidation in Australia’s dairy industry. Sometimes change takes time, especially as a lot of Australian agriculture comes out of a co-operative model.”

In 2007, Irvin said Bega took a 70% stake in Tatura Milk Industries. But it was not until 2011 that it finally merged Tatura with Bega in order to ensure Tatura’s suppliers and stakeholders were comfortable with the takeover.

He says there are “other opportunities” for acquisitions in Australia’s dairy industry.

Irvin says efficiencies can be wrung out of the supply chain of many dairy companies while leveraging international contacts to supply specific product to markets at the desired time.

“Australia needs competition among dairy industry players but we need bigger dogs, but not just one big dog,” he says.

If Bega does acquire Warrnambool, it would create Australia’s biggest publicly traded diary company, with annual sales of $1.5 billion and the production of 1.6 billion litres of milk a year.

Bega is part of the Uncapped 100.