Saputo may change WCB tactics

Complications around takeover bid may force Saputo to buy Warrnambool shares on open market.

Saputo may announce as early as today a change in its takeover tactics towards Warrnambool Cheese and Butter Factory that may include buying Warrnambool shares on market as it strives to get around complications in its bid.

Saputo sought to counter rival Bega Cheese's advantage of having no minimum acceptance conditions by dropping its own minimum acceptance conditions.

The Montreal-based company has also tried to preserve Warrnambool's offer of franked dividends once its stake in Warrnambool went beyond 50 per cent.

Warrnambool, which supports Saputo's $9 per share cash offer, planned to pay Warrnambool shareholders $1.31 in dividends if Saputo got more than 50 per cent of Warrnambool's shares.

These dividends were included in the $9 Saputo per share offer.

But those who bought Warrnambool shares ex dividend and accepted the Saputo offer would only be guaranteed $7.69.

How much Saputo would have to pay accepting shareholders over and above the $7.69 depended on what percentage of Warrnambool they controlled.

In order to come to a decision on this, Saputo needs to close its bid in order to determine any additional money that needed to be paid.

And to do that and to comply with takeover law Saputo must pay accepting shareholders within 28 days of Warrnambool shares going ex-dividend post record date November 26.

But Saputo does not want to close its bid by year-end.

One way to solve this issue is for Saputo to say it is willing to buy all Warrnambool shares on market at $9 each.

Saputo may also promise those selling their Warrnambool shares to it that they may also get as much as a $1.31 per share dividend if they are on the Warrnambool share register as of  November 26.

This values Saputo's takeover offer as high as $10.31. It may prove to be the knockout blow in the Warrnambool takeover fight.

Bega and Murray Goulburn each have an 18 per cent stake in Warrnambool. Kirin Holdings has a 9.99% stake. All may find $10.31 a share offer too rich to turn down.