DataRoom AM: Saputo intolerance

WCB shareholders hit back at their board’s apparent Saputo favouritism, while UBS is also a winner in Ansell’s latest acquisition.

After another big day in the Warrnambool Cheese and Butter takeover stoush, the prospect of crowning a victor appears no closer. Bega Cheese and Murray Goulburn are now taking fellow suitor Saputo to the Takeovers Panel, which may see the Canadian firm asked to hand back the shares it has already received from shareholders. It is the latest twist in a seemingly never-ending battle.

Elsewhere, gloves maker Ansell makes its biggest ever acquisition, Pact Group gets a strong show of support for its IPO, a new face joins the growing list of Australian IPO candidates and investment banks jostle for a slice of the action at Goodman Group.

Saputo, Warrnambool Cheese and Butter, Bega Cheese, Murray Goulburn

The Warrnambool Cheese and Butter takeover saga continues to roll on, with the latest development a request for intervention from the Takeovers Panel by Murray Goulburn Co-operative yesterday. Fellow suitor Bega Cheese will reportedly file a separate complaint with the panel today after both Australian firms considered Saputo’s latest offer as misleading for WCB shareholders.

The two firms have a case given that Saputo did market its offer as a $9 a share proposal coupled with up to 56 cents worth of franking credits before this week announcing a simplified offer of $9.20 a share with the 20 cents of this conditional upon receiving 50.1 per cent acceptances.

As such, it can be argued the revised proposal is worth less to shareholders, and consequently misleading, though that isn’t to say the Takeovers Panel will see it worthy of action. If it does, then Saputo will likely be asked to give back the shares it has acquired in WCB to date.

Regardless of that outcome, there are two glaring issues within the battle worth addressing:

1) Saputo should never have made its offer complicated in the first place.

It was mainly reported in the press as a $9-a-share offer, but the company was readily spruiking the availability of franking credits to eligible shareholders. Now, by simplifying the offer in a way that can be disputed as reducing the offer, it has given strength to its rivals.

2) WCB has appeared too close to Saputo.

The Canadian company may be the best fit and could be offering the best terms to shareholders, but a case can be made that the board hasn’t fully leveraged its position of having three hungry bidders circling. Appearing unwilling to engage with any suitor other than Saputo is not a good look.

Even now, when there are rumours MG will raise its bid once more, WCB is urging shareholders to take up the Saputo offer. Would it not be wise to wait in case MG lifts its bid, which would then likely lead to an improved offer from Saputo?

According to The Australian, several WCB shareholders have been concerned enough about the board’s handling of the takeover to write letters of complaint to the Australian Securities and Investment Commission.

In what was a big day of action on the WCB front, Saputo filed a substantial shareholder notice reporting it had so far received acceptances for 3.73 per cent of WCB stock, though much of that may be accounted for by the securities owned by members of the WCB board.

Bega, meanwhile, said it would extend its offer deadline until December 12, while Murray Goulburn confirmed a willingness to work with Kirin Holdings, which owns 10 per cent of WCB’s stock. Kirin, looking to protect its relationship with WCB, remains a wildcard in the battle, though one suspects it would prefer Saputo didn’t enter the Australian market.

After a day of many developments, we appear further away from a solution.


Two years after glove and condom maker Ansell failed to buy North American-based protective glove maker BarrierSafe Solutions International, the ASX-listed group has its prey.

In 2011, the group was outbid by Odyssey Investment Partners but, given Odyssey is a private equity group, Ansell knew it would not be looking to hang around for ever. Likewise, Odyssey knew it had a suitable buyer for when it saw a desire to move on.

For Ansell, the $670 million takeover represents its largest ever acquisition and sees it expand its reach in the US.

It appears a shrewd deal given the Illinois-based BarrierSafe is prominent within the glove market segments in the US where Ansell is either weak or non-existent, including industrial and dental gloves. The buy will also make North America Ansell’s largest market.

While both buyer and seller appear winners out of the deal, advisor UBS AG is arguably the biggest beneficiary.

The investment bank will not only receive funds from its advising work, but also from the offering of a $300 million bridge facility to Ansell to help fund the deal along with the underwriting of a $338 million share sale to investors and a share purchase plan of a further $100 million.

Ratings agency Standard & Poor’s wasn’t overly enamoured by the deal however, revising the group’s rating outlook from stable to negative. Despite this, its current rating of BBB- was re-affirmed.

The deal – Ansell’s fifth bolt-on acquisition since July 2011 – is expected to close in the first quarter of 2014.

IPO market, Pact Group, Pepperstone

The bookbuild for packaging company Pact Group closed heavily oversubscribed yesterday afternoon, in yet another sign of froth in the IPO market.

The Raphael Geminder-owned group has raised $649 million through the listing process, valuing the company at $1.721 billion.

Credit Suisse and Macquarie Group offloaded 171 million shares at $3.80 a share, ahead of a listing on December 17. The float sees Geminder hang onto 40 per cent of the company, with 57 per cent to be listed and 3 per cent reserved for Gary Wolman, a JV partner of Geminder’s in Asia.

Given the strong demand through the bookbuild process, a strong opening day is expected.

It is likely to be the second largest float of the year behind Nine Entertainment, which is due to hit ASX boards in around a fortnight.

Meanwhile, online currency trading broker Pepperstone has hired Berkshire Capital to assess a possible ASX listing, according to the Australian Financial Review. A float could value the company at as much as $600 million, the report suggested.

You certainly couldn’t blame co-founders Owen Kerr and Joe Davenport for wanting to strike while the iron is hot. If the floats of and OzForex are any guide, there should be no shortage of interest in the fledgling business.

Wrapping up

Almost a year after China Investment Corporation reduced its stake in Goodman Group to 9.9 per cent, investment banks are reportedly lining up to participate in a potential offload of the remainder, according to the AFR. CIC said it would not sell for 12 months to restrict its capital gains liabilities and with that period almost at an end, there’s an expectation its 9.9 per cent will soon be up for grabs.

Elsewhere, a survey of industry participants by KPMG has indicated high expectations for further consolidation in the mutual banking sector, according to The Australian. Around 90 per cent of the credit unions, building societies and mutual banks called upon for the research expect the industry to shrink to below 80 companies within five years, from 106 now.

Meanwhile, Credit Suisse is reportedly the frontrunner to win a lucrative government tender to advise on a new deal between Telstra and NBN Co.

Finally, it appears as if Dexus Property Group will certainly have to raise its offer for Commonwealth Property Office Fund if it wants any chance of gaining control, with recent share price movements forcing its bid further away from the proposal put forward by rival suitor GPT Group.

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