WCB soars on takeover bid

Warrnambool Cheese and Butter Factory Co Holdings (WCB) shares have soared after it recommended a $392.7 million takeover bid from Canada's largest dairy processor, Saputo Inc, after earlier spurning a $320 million offer from Bega Cheese (BGA). 

At 1450 AEDT, shares in the group were 11.46% higher at $7.20, against a benchmark fall of 0.35%. 

In a statement to the Australian Securities Exchange, WCB said it had entered into a takeover bid implementation deed with Saputo, which will make an all cash off-market takeover offer of $7.00 per share for all shares on issue.

The offer is subject to conditions including Foreign Investment Review Board approval and a minimum acceptance condition of more than 50% of WCB shares.

The companies have agreed WCB may declare and pay fully franked special dividends of up to a maximum of $1.31 per WCB share, with a corresponding reduction in the offer price, on Saputo reaching specified relevant interest thresholds in WCB. 

This would enable distribution of franking credits that could deliver up to an extra 56 cents per share in value.

The WCB board unanimously recommends the offer and each director and executive intends to accept the offer for all shares they hold, the group said.

WCB has agreed to exclusivity restrictions that stop it from entering discussions with any competing bidder, and must also pay a break fee if the board changes its recommendation.

WCB directors last month unanimously recommended shareholders reject Bega's offer of 1.2 Bega shares and $2.00 cash for each WCB share, saying the offer was inadequate. 

Saputo believes its offer is highly compelling and said excluding any extra value from franking credits, the all cash offer price represents a 21% premium to the implied value of Bega's offer, based on Bega's share price on the last trading day before its offer was announced.

Saputo said its offer also gives WCB shareholders the certainty of 100% cash for their shares and fewer conditions than the Bega offer.

The suitor said its strategy in the acquisition is to position WCB as the centre of its operations in Australia and its main platform to service demand for dairy in the Asia Pacific region.

Saputo said it can assist WCB's future development and accelerate its growth nationally and internationally, which should lead to a greater demand for milk and benefit WCB's suppliers.

Bega is part of the Uncapped 100.