SAPUTO’S WARRNAMBOOL BID NOT OVER

Saputo Inc.’s all-cash $450-million agreement to acquire Warrnambool Cheese & Butter Factory Co. is far from a done deal.

The Australian company’s board has unanimously recommended that shareholders accept Saputo’s offer, but Bega Cheese Ltd. made an offer for Warrnambool on Sept. 12.

Saputo’s offer is 11.2% higher than this latest cash-and-stock bid, but Bega owns roughly 17% of Warrnambool shares. Murray Goulburn Co-operative has a similar stake and withdrew its offer in 2010 after failing to overcome competition concerns.

One of the conditions of Saputo’s bid is that more than 50% of Warrnambool’s shares must be tendered, which could be key given the large stakes held by these Australian competitors.

Mark Petrie, a consumer products analyst at CIBC World Markets, does not think Saputo’s current offer will be successful due to Bega’s continued interest in this asset and its equity stake.

“Warrnambool’s shares have already traded through the offer price, implying another bid is expected,” Mr. Petrie said in a note to clients.