Warrnambool war raises questions

At last, a counterbid. It is the one thing that has been lacking in the three way battle for control of Warrnambool Cheese and Butter.

And it is unlikely to be the last.

Curiously, as it did with Saputo's initial offer, the WCB board has immediately endorsed the revised bid from the Canadians.

When it comes to the attentions of local bidders, however, WCB has been reluctant to even entertain the idea of a merger or an outright acquisition.

It rejected outright Bega Cheese's initial cash and share advance. And when Murray Goulburn entered the fray last week with a clearly superior offer to Saputo's initial bid, Warrnambool obfuscated, claiming this week it required more information.

Given the unusual conditions attached to the Saputo offer - a minimum 50.1% acceptance - it is difficult to understand the rush from Warrnambool to embrace this latest offer from the Canadians.

At $8 a share, it easily trumps Murray Goulburn's $7.50 a share cash offer.

But given Bega and Murray Goulburn between them account for 35% of Warrnambool, the Canadians may still struggle to get to that level. That means Warrnambool shareholders accepting the offer will have to wait until the Canadians hit 50.1% before they are paid for their stock.

Warrnambool's farmer owners, meanwhile, now may come to a new appreciation of the future prospects of their company and the role it will play in a rapidly expanding Asian market, given the bidding war that has erupted (see David Gilmour's WCB: All the way to $8.50?).

Saputo this morning claimed that its revised bid offered more certainty than the local bids given it was not subject to Australian Competition and Consumer Commission approval.

That is misleading. Its acceptance hurdles detract from certainty for a start. And, unlike the local bids, it will be subject to Foreign Investment Review board approval which, given the new climate of suspicion about foreign ownership of rural industries and agricultural land that has been ushered in with the new government, throw a cloud of uncertainty over the transaction.