As to be expected, the earlier ‘don’t sell’ from the board of Warrnambool Cheese and Butter Factory (WCB) has turned into rejection of Bega Cheese’s (BGA) $319 million offer on the ground that it is inadequate.
This, like the commentary in the earlier ‘don’t sell statement’ and yesterday’s effort, are merely a gambit to try and get a higher price from Bega Cheese which wants to create the second biggest dairy company in the country with total sales of $1.5 billion.
One way or another Warrnambool Cheese will fall to either Bega, or a new, probably foreign bidder.
Warrnambool directors said in yesterday’s statement that, "The board of WCB, together with its advisers, has undertaken a detailed review of the offer contained in Bega’s bidder’s statement.
"WCB directors unanimously recommend that WCB shareholders reject Bega’s offer."
Predictably, Warrnambool directors said the Bega offer did not reflect fair value for WCB shares or the strategic value of WCB to Bega. All hostile bids or semi hostile offers start out this way.
BGA Vs WCB YTD – Shares up as Warrnambool says a first round ‘no’ to Bega
And directors claimed that the potential savings and benefits from a combination of WCB and Bega were materially higher than set out in Bega’s bidder’s statement.
WCB said the Bega offer was uncertain, opportunistic, highly conditional and might result in a potential tax liability for WCB shareholders.
And directors said the company had strong prospects as a globally focused manufacturer of dairy products and a strong platform for future growth.
Bega is offering $2 cash and 1.2 Bega shares for each WCB share.
The rise in Bega shares has pushed the value of the offer past the $319 million original value.
Bega already holds18% of Warrnambool’s issued capital.
The sticking point so far as Bega is concerned, is the attitude of the huge Murray Goulburn Co-Op which has already two unsuccessful attempts to grab Warrnambool. It can’t bid again because the ACCC has rejected the bid on competition grounds.
As well, Murray Goulburn has 17% of Warrnambool, but also has more debt than a year ago at just over $205 million, up from $114 million at the end of 2011-2.
That would limit Murray Goulburn’s ambitions, if it could see its way around the ACCC blockade.
But that stake is now the key to Bega winning the battle. Murray Goulburn could emerge as the major shareholder in the combined Bega – Warrnambool group.
WCB shares rose 8c $6.18 yesterday as Bega shares rose6c to $3.45. Both are up since the offer was announced on September 12. Bega shares are up 8c, Warrnambool shares have rise from $5.82.
