Kirin enters WCB fight

Lion Nathan has taken a strategic stake in Warrnambool Cheese and Butter as the takeover battle reaches fever pitch.

Japanese group Kirin has revealed itself as the mystery buyer of a blocking stake in Warrnambool Cheese and Butter (WCB).

The Japanese brewer which owns Lion Nathan and Dairy Farmers this morning placed an order for $40 million worth of WCB stock at $9.25, sending Warrnambool's share price soaring to as high as $9.30, snapping up 9% of the company.

It is believed that it will build on the stake, clearly with the intention of launching a takeover bid.

Dairy Farmers, which provides mostly whole milk for the domestic market, has proven to be a disappointing investment for Kirin particularly since both Coles and Woolworths have embarked on a price war that has seen the retail prices for whole milk fall to $1 a litre.

Warrnambool is a processor with export potential, particularly in the key ingredient for infant formula, and Kirin obviously has shifted its focus from the intensely competitive Australian domestic whole milk market to the opportunities arising from the rapidly expanding economies of Asia.

At $9.25, Kirin through Lion Nathan is offering a significant premium to an $8 a share offer from Canadian group Saputo and could put the takeover beyond the grasp of the Canadians.

Saputo's offer is now dead in the water. Apart from the price differential, Lion Nathan, Bega and Murray Goulburn between them account for close to 45% of WCB which would make it nigh on impossible for Saputo to attain its minimum acceptance level of 50.1%.

Bega started the ball rolling with a $6.50 a share takeover bid almost a month ago. It was trumped by the Canadians with $7 a share offer, which in turn was beaten by Murray Goulburn with a $7.50 a share bid (see WCB: All the way to $8.50?).

Last week the Canadians countered with $8 and most investors believed Murray Goulburn would return with a slightly higher offer.