Warrnambool Cheese and Butter Factory (WCB) is urging investors to reject a takeover offer from its slightly larger listed rival Bega Cheese.
Last month, WCB knocked back Bega’s $320 million takeover offer that comes amidst vigorous activity in the dairy sector driven by demand out of China.
The Victorian dairy producer said Bega’s offer was too low and did not have a high enough cash component.
WCB’s chief executive David Lord concedes the company is «in play» but the board believe the Bega offer is «inadequate».
«Certainly, I think we’re in play,» he told the ABC’s Inside Business program.
«I think that’s a fair assessment of things and the board is focused on the best possible outcome for shareholders.
«We really believe that the Bega offer is inadequate in terms of not recognising the full value of the strategic nature, the unique nature of our assets and also the synergistic value of putting these two companies together.
«I think that short-changes our shareholders.»
Bega offer comes as investment benefits due
Warrnambool says its earnings could double in the current financial year, and that continued improvement in market conditions and better returns due to improvements will drive earnings growth.
«What’s a major concern to the board is that fundamental value for these highly strategic, unique assets that we have in Warrnambool is recognised in any offer,» Mr Lord said.
«Our assets are, you know, generations in the making and they are unique, so we would expect that any acquirer should recognise that fully, and also recognise the prospects that the business has.
«We’ve been investing heavily in the business in the last three years, investing in higher-margin products and less volatile products.»
Mr Lord says there are a considerations the WCB wants shareholders to understand before any decisions are made.
«We’ll get that information to the shareholders’ hands and when they see that we’re certainly confident that they’ll land in the same places as they board and that is that this offer from Bega is inadequate,» he said.
Warrnambool’s other major shareholder, Murray Goulburn, owns approximately 17 per cent of WCB.
In 2009, it made a takeover offer of $4 per share, which was rejected then as being too low.
Asked if he had been speaking with Murray Goulburn about Bega’s bid, Mr Lord said it was a «good question».
«Maybe that’s a question you need to direct to Gary Helou at Murray Goulburn,» he said.
«Gary and I have had a number of conversations of late, the sort of conversations you’d expect us to have with our major shareholders and we talked about a lot of things.
«I’m not sure what their intentions are and perhaps we’ll find out over time.
«We’ve got one proposition in front of us at the moment, and we are reviewing that proposition, and we are generating all of the information that we think shareholders need to make a proper decision.»
Source: ABC