Shareholders in Bega Cheese (BGA) yesterday heard a strong defence of the company’s ambitious takeover offer for Warrnambool Cheese and Butter (WCB), and then gave strong support to the board and management for the bid.
In fact media reports said there were no criticisms of the Warrnambool offer heard at the Bega annual meeting.
The company’s AGM heard chairman Barry Irvin repeat earlier comments that Bega intends to pursue its Warrnambool Cheese and Butter takeover offer, despite rival, higher offers from Saputo of Canada and Murray Goulburn, the country’s biggest Australian owned dairy group.
Bega shares closed $4 yesterday, down 1.9%. Warrnambool shares ended at $8.10, down a cent.
BGA Vs WCB YTD – Bega adamant on Warrnambool offer – new offers rumoured
There could be more action shortly with reports last night that higher bids are on the way with Bega and Saputo nominated as possible sources of these new offers.
The Bega offer of 1.2 of its shares and $2 cash was valued at $6.80 at the close, under the $7.50 a share cash offer from Murray Goulburn and the $7 from Saputo of Canada.
Bega shareholders showed their support for the bid by approving the lifting of a 10% shareholder cap, which will now allow shares to be issued in the bid (or in a placement) to anyone.
That will allow Murray Goulburn to accept the offer for its stake in Warrnambool (remote at the moment given its offer last Friday).
But it also allows Bega to issue a swag of shares to someone like its marketing partner in the shape of the giant Fonterra group of New Zealand.
In his address to the meeting yesterday, Mr Irvin followed Murray Goulburn CEO Gary Helou in supporting consolidation in the industry to create a so-called national champion.
"The Australian dairy industry needs to consolidate and needs to be in Australian hands," Mr Irvin told shareholders at the AGM.
"Bega’s offer continues in our mind to be a compelling one. … We believe the common cultures should see these businesses come together."
Mr Irvin said Bega Cheese would retain WCB’s brand name and operations, but that the merger between the two agribusiness players would see savings of $7.5 million (which is what was said in the offer documents).
The offer would also see a combined market capitalisation of about $845 million, with revenues around $1.5 billion and a milk intake of 1.6 billion litres. A merged company would be second only to Murray Goulburn.
“In anybody’s language, that’s a significant dairy company,” Mr Irvin said. Bega Cheese reserved the right to revise its WCB offer, which was made on September 12 and open until November 28, he told the meeting.
But he added that Bega Cheese was not in a one-game scenario and was also always open to other opportunities.
Bega Cheese’s offer consisted of 1.2 shares and $2 cash for each WCB share, which WCB directors have rejected as being inadequate.
Warrnambool directors said then they were not yet in the position to make a formal response as they were unaware of the bid. The company holds its AGM tomorrow.
