Expectations are mounting that Bega Cheese will increase its $ 437 million bid for Warrnambool Cheese & Butter after executive chairman Barry Irvin said he intends to be the successful bidder ahead of a Bega board meeting this week.
Mr Irvin told Financial Review Sunday that Bega – which is locked in a three-way tussle for control of WCB with Murray Goulburn and Canada’s Saputo – is well positioned and has its eye on the prize.
“Bega Cheese is still strongly in the game. We are the only offer that has now dealt with all its external conditions and we can think about strategy without having to wait for external approval,” he said.
On Thursday the Australian Competition and Consumer Commission said it would not oppose Bega’s proposed merger with WCB, paving the way for Bega to make its offer of $ 2 cash and 1.2 Bega shares (worth $ 7.80 on Friday’s prices) unconditional.
Mr Irvin said he was willing to play the long game, arguing that the takeover battle was not like “turning up to an auction on a Saturday”. But he also said that Bega reserved the right to lift its bid.
“I’m focused on being successful with this bid. My board continues to encourage me to have that focus and my shareholders continue to have that focus,” he told the TV program.
Bega already owns 18 per cent of WCB but Saputo, a $ C10 billion French-Canadian giant and the world’s 10th biggest dairy processor, is in the box seat with its agreed $ 8 a share all cash bid for WCB.
However, Saputo’s ambitions were complicated on Tuesday when Lion, a wholly-owned subsidiary of Japanese behemoth Kirin, seized 9.9 per cent of WCB at $ 9.25.
Australia’s biggest dairy exporter Murray Goulburn, which offered $ 7.50 in cash for WCB, owns 17.7 per cent of WCB. On a combined basis, Bega, Murray Goulburn and Lion own close to 46 per cent of WCB’s stock.
The tight register makes Saputo’s 50.1 per cent minimum acceptance condition problematic.
Bega chief executive Aidan Coleman and another Bega director are currently in Japan – which is Bega’s biggest market for cream cheese – for the International Dairy Federation summit.
Once the directors return the Bega board and its advisor David Williams of Kidder Williams will meet and discuss their next move in the game.
Throughout the takeover battle WCB has objected that Bega’s stock is overvalued, and Bega shares have soared 40 per cent since it launched its bid in September.
Bega argues the share price rise reflects the value of the company and the merits of a merger with WCB, but WCB say the stock has run well beyond its fundamental worth.
Analysts have suggested Bega may consider raising the cash element of its bid or introducing more flexibility into its offer – like Viterra did in its acquisition of ABB Grain – to nullify the objection to Bega’s scrip.
The Bega board are also likely to consider the implications of Fonterra’s share raid on Bega on Thursday night.
The New Zealand dairy giant snapped up 6 per cent of Bega at $ 4.95 a share as industry players jostle for position ahead of a major consolidation phase.
The Australian Financial Review