TWO bidders for Warrnambool Cheese & Butter (WCB), Murray Goulburn and Bega Cheese, could turn to the Takeovers Panel to derail a revised offer for the producer from Canadian dairy giant Saputo.Saputo on Monday declared its $9 a share cash takeover bid for WCB unconditional and offered a 20¢ sweetener if it gets control.

Saputo chief executive Lino Saputo Jnr said he is optimistic his company can win control of WCB by Christmas ahead of a roadshow in Victoria for WCB shareholders and suppliers.

But if Lazard-advised Murray Goulburn and Kidder Williams-advised Bega drag the matter before the takeovers arbitration body, Saputo’s Christmas present may be delayed.

Saputo’s move has heaped pressure on rival bidder Murray Goulburn, which is still up to six months away from getting regulatory approval.

Sources close to both Bega and Murray Goulburn said the companies were considering appealing to the Panel. If action is taken, it is likely to focus on director’s duties and truth in takeovers provisions.

However, the Panel’s treatment of a similar matter last year in Dulux’s takeover of Alesco suggests that it does not believe the value of franking should be considered in the implied value, which suggests it favours Saputo’s argument.

The WCB board has previously endorsed Saputo’s offer.

“This is a call to action. We have the most compelling offer, it’s concrete, it’s unconditional, and the payment will be received within five business days [of acceptance],” Mr Saputo told The Australian Financial Review.

“I’m here [in Australia] for the third time in one and a half months and I would assume this is the last time I’m here before the end of the transaction… We are in the final push here”.

To get momentum behind the offer, Saputo has put an additional 20¢ a share on the table conditional on Saputo getting 50 per cent of WCB.

The 20¢ sweetener replaces a confusing offer of two franked special dividends worth a combined $1.31 WCB proposed to pay shareholders under the previous $9 a share offer agreed with Saputo.

With the tax benefits of franking, some shareholders could have received value of $9.56 under the previous offer. Rival WCB suitors Murray Goulburn and Bega Cheese are calling foul play and claim Saputo has reduced its offer.

Murray Goulburn said it “believes that the amended terms represent a reduction in the implied value of Saputo’s offer to certain WCB ­shareholders.”

Kidder Williams boss David Williams, who is advising Bega, said: “Like MG, we believe there has been a reduction in the implied value of the offer to us and other shareholders.”

Both Mr Saputo and WCB managing director David Lord reject the claim, arguing the offer is unchanged because the dividends were to be paid by WCB.

“The Saputo offer was always $9 and that hasn’t changed,” Mr Lord said. “The extra 20¢ now goes to every shareholder, not just shareholders under specific tax circumstances.”

Both Murray Goulburn and Saputo have reserved the right to increase their bids, while Bega has declared its offer of $2 cash and 1.2 Bega shares final.

Bega, Murray Goulburn and Saputo own 18.4 per cent, 17.7 per cent, and 0.78 per cent of WCB respectively.

Between 30 per cent to 40 per cent of the register is owned by Warrnambool region locals, which makes Saputo and Murray Goulburn roadshows in south-west Victoria critical battles in the bid.

Japan’s Lion, which owns 9.9 per cent of WCB, is keeping its cards close to its chest and playing a waiting game. WCB shares rose 2 per cent to $9.23 on Monday.

Assuming Saputo gets 50 per cent of WCB and the $9.20 offer applies, Saputo’s revised offer is valued at about $515 million.

WCB said all of its directors and executives who have not already accepted the Saputo offer intend to accept the amended offer immediately and without delay in respect of all the shares they hold personally.
Source: Queensland Country Life