Warrnambool Cheese & Butter Factory Co. (WCB), the Australian target of a three-way takeover battle, said Saputo Inc. (SAP) may win the support of shareholder Japan’s Kirin Holdings Co. for its C$ 444 million ($ 424 million) bid.
Saputo, Canada’s largest dairy processor, will probably provide assurances to Kirin’s local unit over supply agreements between the companies following any takeover, Warrnambool Chief Executive Officer David Lord said today in a phone interview. “The conversations they have with Saputo will be around having their interests protected.”
Australia’s Treasurer Joe Hockey said today that the government had approved Saputo’s offer without imposing conditions. Its A$ 8 a share offer for Warrnambool, the maker of brands including Sungold milk and Great Ocean Road cheese, is higher than Murray Goulburn Cooperative Co.’s A$ 7.50 cash proposal and above a cash and shares bid from Bega Cheese Ltd. (BGA), the company’s largest shareholder.
With the competing bidders expected to reject Saputo’s offer and some small shareholders opposed to a foreign company taking ownership of Warrnambool, the Canadian producer may struggle to win sufficient backing, said Mark Topy, an analyst at Canaccord Genuity Group Inc. “If Saputo doesn’t get to 50 percent, my view is that there’s a serious prospect that they will let the bid lapse.”
Warrnambool, which has recommended the Saputo offer, rose 1.1 percent to A$ 8.54 in Sydney. Bega declined 3.6 percent to A$ 4.36, making its offer worth A$ 7.23 per Warrnambool share.
The share trading premium reflects the potential tax credit of as much as 56 cents a share payable to holders if the bid is successful, rather than any expectation of a new offer, said Lord.
Saputo declined to comment on talks with shareholders. Lion spokeswoman Leela Sutton declined to comment on any discussions with bidders.
Warrnambool has agreements to supply at least 12,000 metric tons of cheddar each year for Lion’s Coon and Cracker Barrel cheese brands, according to a presentation last month.
The rival suitors are seeking to raise production and add dairy export infrastructure amid rising demand in Asia. China is setting records for milk-powder imports, while Southeast Asia’s six largest economies are unable to produce enough dairy goods to meet local demand, according to a July report by Rabobank, which specializes in agricultural research.
Bega holds 18 percent of Warrnambool and Murray Goulburn holds 17 percent, according to data compiled by Bloomberg.
Saputo’s bid is dependent on securing more than 50 percent of Warrnambool shares, though the producer can waive the condition if it obtains at least 40 percent, Warrnambool said today in a statement.
Bega has won consent for a deal from the Australian Competition and Consumer Commission, while Murray Goulburn has applied for regulatory clearance to the Australian Competition Tribunal.
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