Saputo increases conditional Australian dairy bid to C$498 million

MONTREAL – Canadian cheese giant Saputo has again sweetened its bid for Australia’s oldest dairy processor, offering A$9.20 per share if it acquires a majority of Warrnambool Cheese and Butter shares.

The bid adds 20 cents per share to its unconditional offer and bests the proposals from two local rivals.

Warrnambool’s board reaffirmed its unanimous support for the C$498 million (AUD$515 million) takeover offer in the absence of a superior proposal. It also announced Monday that it no longer intends to pay any dividends, including 46 cents per share it had planned to pay if Saputo gained 50.1 per cent of the company, and 85 cents if it obtained 90 per cent.

Saputo’s (TSX:SAP) next closest bid of A$9 per share comes from Murray Goulburn Co-Operative, Australia’s largest dairy with 31 per cent market share which owns about 18 per cent of WCB shares. Fellow bidder Bega Cheese owns another 18 per cent while Japan’s Kirin owns 10 per cent.

Irene Nattel of RBC Capital Markets said the Murray Goulburn could still adjust its offer, which faces competition bureau issues that could take six months to resolve. Bega has said its unconditional cash and shares bid was “final.”

She said the strategic rationale for the transaction remains unchanged for Saputo: provide another low-cost milk production platform. More than half of Australia’s milk production is exported.