Canadian dairy giant, Saputo, has launched a premium-priced takeover for the remaining 12 per cent of Warrnambool Cheese and Butter (WCB) it does not already own.
Saputo is offering to pay $8.85 for each WCB share – almost 25pc more than they were fetching on the Australian Securities Exchange (ASX) on Friday ($7.09) and 30pc up on the average share price of $6.81 for the past six months.
The south western Victorian company’s independent board committee has recommended shareholders accept the offer, unless superior offers emerge.
The committee conceded a superior offer was unlikely given the tight makeup of WCB’s share register.
About 10pc of Warrnambool’s shares are held by the Japanese-owned beverage giant, Kirin, which owns the Lion Dairy and Drinks business in Australia.
Kirin bought into WCB during a titanic struggle for control in 2013 after Bega Cheese launched a takeover bid for the company which was then matched and raised by Saputo.
That was followed by a counter bid launched by big co-operative Murray Goulburn and Lion’s entry onto the share register.
At that time Lion said it wanted to ensure it had a stake in the company responsible for manufacturing much of its cheese products on contract, including the Cracker Barrel and Coon brands.
WCB shares, which had been trading for less than $4 each during 2012 and 2013, shot up to more than $5, then peaked at $8.77 in January 2014 when Bega bowed out of the race, unable to match Saputo’s cashed-up determination.
Last year Saputo appeared set to increase its stake in WCB and move ahead with plans to delist the company when Warrnambool issued extra shares to its shareholders during a $142m capital raising in June.
Saputo paid for a full entitlement of extra shares, however so did Lion, which lifted its blocking stake to slightly more than 10pc.
Although Lion sold its hard cheese business to WCB in March 2015 for $137.5m to re-invest the funds in upgrading its specialty cheese operations in Tasmania, the Japanese company has been reluctant to relinquish its strategic shareholding.
A company spokesman said Lion was not yet making any comment in response to Saputo’s latest move.
In a Monday morning statement to the ASX Toronto-listed Saputo said it had received Foreign Investment Review Board (FIRB) approval for its bid, which was conditional on it securing at least 90 per cent of shares.
It was Saputo’s intention to “cause the delisting of WCB, whether that was a result of being in a position to proceed with the compulsory acquisition or in accordance with ASX guidance after the offer period ended” in early March.
WCB’s independent board committee sought an independent expert’s report to determine if the Saputo offer is fair and reasonable
Saputo’s 88pc majority in WCB makes it the fourth biggest dairy business in Australia.
It is also the largest cheese maker and a leading milk and cream processor in Canada, one of the top three cheese businesses in the US and a major yoghurt producer, and the third largest dairy company in Argentina.
Its global product range includes the brands Armstrong, Dairyland, DairyStar, Alexis de Portneuf, Scotsburn and Stella.
WCB, which makes the Coon, Cracker Barrel, Mil Lel and Great Ocean Road brands, among others, is one of Australia’s oldest dairy businesses, originally founded as a farmer co-operative in 1888 and listed in on the ASX in 2004.
It also manufactures milk powder, whey protein concentrate, butter, cream and packaged milk.