Saputo making white-knight play for Australian dairy firm

A major Australian dairy processor fending off an unwanted suitor at home has turned to Canada’s biggest dairy firm as its white knight.

Saputo Inc. on Monday announced an all-cash bid of A$7 per share (about C$387 million) for all outstanding shares of publicly-traded Warrnambool Cheese and Butter Factory, one of Australia’s biggest dairy companies.

Warrnambool, which processes cheese, butter, butter blends, milk, cream and other dairy ingredients for domestic and export markets, became the target Sept. 12 of an unsolicited cash-and-stock bid from another major Australian processor, Bega Cheese.

Bega’s offer of 1.2 Bega shares and A$2 cash equals about A$6.30 per Warrnambool share, Saputo said Monday. Warrnambool’s board has recommended shareholders instead accept Saputo’s offer “in the absence of a superior proposal.”

Montreal-based Saputo’s offer would be subject to conditions such as foreign investment approval and a minimum tender condition of greater than 50 per cent, the company said, adding it expects its offer to close in “around early December.”

Warrnambool’s holdings include two processing plants in South West Victoria and South Australia, employing over 420 people. The company booked earnings before interest, tax, depreciation and amortization (EBITDA) of C$25 million on C$477 million in sales in its latest fiscal year ending June 30.

Saputo said Monday it plans to finance the takeover out of its newly committed bank loan with a three-year term.

Warrnambool, headquartered near the city of the same name about 250 km southwest of Melbourne, late last month urged shareholders not to accept Bega’s bid, describing it as “inadequate” and “highly opportunistic” in timing.

Warrnambool said Bega’s offer was “timed to exploit recent gains in Bega’s share price” and that the “potential synergies” from a combination of Bega and Warrnambool are “materially higher” than Bega outlined in its bidder’s statement.

Bega, based at the town of the same name about 225 km south of Canberra, bought a 15 per cent stake in Warrnambool in 2010.

Bega’s executive chairman Barry Irvin said Sept. 12 a merger with Warrnambool would create an Australian dairy firm with “greater global reach, customers and product range and financial strength that will be able to take its place on the world stage.”

Bega, which started as a dairy co-operative in the early 1900s and went public in 2008, now bills itself as Australasia’s largest cheese cutting and packaging company. It bought full control of fellow dairy processor Tatura Milk, Australia’s biggest domestic maker of infant formula, in 2011. — Network

Related stories:
Saputo books higher Q1 profit but expects tough year, Aug. 6, 2013
Saputo bailing out of European cheese market, Feb. 25, 2013


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