Deep-pocketed Saputo Inc. will likely sweeten its offer in a bidding war for Warrnambool Cheese and Butter Factory Company Holdings Ltd., says an analyst.
Montreal-based dairy giant Saputo made a $378-million all-cash proposal to buy Australia’s WCB earlier this month, but that bid has been trumped by a $405-million (U.S.) offer from Murray Goulburn Co-operative of Australia, WCB’s second-largest shareholder.
Goulburn owns about 17 per cent of WCB, while Saputo does not have a stake in the Australian dairy company.
In Australian dollars, Goulburn is offering $7.50 per share in cash, compared with Saputo’s $7.00 per share proposal.
Both those offers are higher than a $5.78 cash-and-shares bid put in by Australia’s Bega Cheese Ltd. on Sept. 12.
Bega is WCB’s largest shareholder with a stake of about 18 per cent.
Saputo’s bid was backed by WCB’s board and management.
Saputo’s present offer does not represent a major outlay for Saputo, but would be a “significant transaction” for the much smaller Bega Cheese and Goulburn, Desjardins Securities analyst Keith Howlett said in a research note on Friday.
“Our expectation is that Saputo will increase its bid for Warrnambool next week, after reviewing with its legal advisors whether the Murray Goulburn bid will face meaningful competition law hurdles and after evaluating the formal response (when issued) by Warrnambool’s board of directors to the offer by Murray Goulburn,” he said.
Goulburn has about a 31 per cent market share in Australia, compared with about seven per cent for Bega and zero for Saputo, said Mr. Howlett.
“Murray Goulburn is highlighting its Australian heritage and its ownership by dairy farmers. Bega Cheese is also promoting its Australian heritage,” he said.
Saputo spokeswoman Sandy Vassiadis said on Friday that the company is “considering its options” in light of Goulburn’s counter-bid.
Saputo is Canada’s largest dairy processor and the second biggest in North America. It is also present in Europe and Argentina.