January 30, 2017

Canada’s largest dairy processor, Saputo, has made a cash offer for the remaining 12 percent it does not already own in Australia’s oldest dairy, Warrnambool Cheese and Butter (WCB) in a deal that values the company at $682 million.

The per-share price of A$8.85, as outlined in a statement by Saputo to the Australian Securities Exchange, is a premium of 24.8 percent to Warrnambool’s closing price of A$7.09 on Friday, January 27.

Saputo already owns a hard-won 88.02 percent of WCB after coming out on top of a three-way bidding war with Murray Goulburn and Bega Cheese in January 2014 when Bega Cheese, Ltd. announced it had agreed to sell its 18.8% stake in WCB to Saputo for between A$97.7 million and A$101 million for its interest, and Murray Goulburn announced it had agreed to sell its stake in WCB for $93 million.

WCB’s board committee has suggested its shareholders accept the latest offer by Saputo, stating that a higher offer was unlikely due to the tight nature of WCB’s share register, reports The Land.

Approximately 10 percent of the outstanding shares in WCB are controlled by Kirin, the Japanese owner of the Lion Dairy and Drink business in Australia. Acquiring the stake in 2013, Kirin wanted to ensure continued ownership in the company that supplied the bulk of its cheese products for its Cracker Barrel and Coon branded product lines.

Last year Saputo attempted to shift its stake in WCB above 90 percent through a $142 million capital raising and share issue, however, Kirin-backed Lion raised its entitlement as well, leaving only a 0.3 percent shortfall, according to The Australian.  Despite the fact that Lion sold its hard cheese business to WCB in March 2015, The Land states that the Japanese company remains seemingly set to retain its strategic stake in WCB.

Saputo’s current stake in WCB makes it truly a global dairy giant, making it not only the largest dairy and cream producer and largest cheese maker in Canada, but a top three cheese business in the U.S.; third largest dairy producer in Argentina; and the fourth largest dairy producer in Australia with control of the Coon, Cracker Barrel, Mil Lel, and Great Ocean brands. The company states that it has secured approval for its bid from Australia’s Foreign Investment Review Board (FIRB) under the condition that the bid raises its holding in WCB above 90 percent.

Not the Only One

This is not the only recent strategic move by a major Australian dairy player. Earlier this month, Australia’s Bega Cheese announced it will acquire the majority of Mondelēz International’s Australian and New Zealand grocery and cheese business in a A$460 million deal.

This transaction will once again make Australia’s most iconic Vegemite food spread Australian-owned, and Bega expects the new business to generate pro-forma net revenues of about A$310 million and EBITDA of between $40 and $45 million in its first year of operation.

“The iconic brands alongside the Bega brand are strong building blocks to enable Bega Cheese to become a great consumer goods business,” Bega Cheese Executive Chairman Barry Irvin said. “The wonderful heritage and values that Vegemite represents and its importance to Australian culture make its combination with Bega Cheese truly exciting.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com

-Melissa Lawrence also contributed to this article.