MENU

What’s next for Warrnambool?

The Australian takeover panel on Friday dealt a hefty blow to Canadian dairy company Saputo in its quest to acquire Australia’s Warrnambool Cheese and Butter Company (ASX: WCB). The panel ruled that Saputo must stop processing shareholder acceptances of its revised $9 to $9.20 bid for the Australian dairy company while the panel considered a rival bid from Australian co-operative Murray Goulburn.

Saputo last week upped its offer for Warrnambool from $9 to $9.20 on the proviso that it received acceptance from 50% of Warrnambool shareholders by 13 December. Then, on Friday, Murray Goulburn improved its bid to $9.50 a share and urged the Warrnambool board to reconsider paying the previously announced, but then rescinded, 56 cents per share special dividend to take its offer to $10.06.

The Warrnambool board accepted the improved Saputo offer and recommended shareholders accept it based on the fact that there were no conditions to the $9 offer, unlike the Murray Goulburn offer which hinges on a decision by the Australian Competition Tribunal. The new Saputo offer is actually less than the previous offer, as the previous $9 offer included the 56 cents per share special dividend.

Based on what appeared to be undue favouritism of the Saputo bid, Murray Goulburn had lobbied publically and privately that its proposed takeover was in the national interest and a better deal for existing shareholders. As a result of the new bid and complaints from Murray Goulburn, the takeover panel ordered Saputo to cease collecting shareholder acceptances while it looks into the bid.

No formal reason for the decision was given, but appears to be bad news for Saputo, which has thus far received acceptances from 9.65% of shareholders. The panel could force Saputo to return the shares or lift its current offer to $9.56, in line with its previous offer. The 50% level is required for Saputo to approach Warrnambool’s major shareholders Kirin Holdings (9.99%), Bega Cheese (ASX: BGA) (18.6%) and Murray Goulburn (17.8%) about control of the dairy producer.

Foolish takeaway

The latest development in the battle for Warrnambool Cheese and Butter Company is probably good news over the short term for current shareholders. The analysis by the takeover panel will ensure that shareholders will get the most money for their shares. Having said that, Warrnambool shares have returned nearly 160% in 2013 and currently trade at $9.24, above Saputo’s offer but below that of Murray Goulburn.

If the Saputo bid is rejected by the takeover panel, investors will be waiting until potentially March 2014 for a ruling from the Australian Competition Tribunal.

Should you take profits now?

Smaller investors might consider selling now in order to realise profits and deploy it into high-yielding stocks for income. If that sounds like you, perhaps you should consider The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.