WCB could hit $11: source

Analysts split on share price outlook, but agree Warrnambool shares have climbed unexpectedly high amid M&A uncertainty.

Warrnambool Cheese & Butter's (WCB) share price could reach highs of $11 before it is swallowed by one of three suitors pursuing the company, one source predicted yesterday.

While analysts were quick to play down the suggestion, they added it was completely unexpected that the target's share price would ever trade as high as it has.

The dairy stock was trading at $8.55 by close of play yesterday, pricing in the likely chance of either Bega (BGA), Murray Goulburn or Canada's Saputo raising its offer for the company. Bega will discuss its intentions at a company board meeting today.

WCB's shares have doubled since Bega initially bid $320 million for the company in September (see WCB: All the way to $8.50?).

The highest offer is from Canadian giant Saputo, worth almost $450m. In the region, there is strong competition for milk supply between Warrnambool, Fonterra and local dairy co-operative Murray Goulburn.

If Saputo secures control of WCB, it could potentially be a stronger competitor, given that as a $10 billion company it has a stronger balance sheet than its rivals. Saputo has signalled it would grow WCB's operations, which suggests the company could continue to grow its milk supply.

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