Saputo is taking another large step towards acquiring the majority share of Warrnambool Cheese & Butter (WCB), Australia's oldest dairy processor. Bega Cheese Ltd. has announced that it will sell its 18.8% share of Saputo. This effectively means that Saputo will control 45.2% of Warrnambool, according to Canadian news outlet CBC News.
"We're really happy with the outcome this morning but there's still days left in the offer and there's still work to be done," Saputo spokeswoman Sandy Vassiadis said in an interview.
Bega was formerly involved in a bidding war with Saputo, but lost out after higher cash offers were made. Bega said that it decided that Saputo's offer was the best option, though it was disappointed that it is unable to merge with WCB or at least for the company to remain Australian-owned.
Saputo still has one rival: Australia's largest dairy processor, Murray Goulburn, that owns about 17.7% of Warrnambool. The Murray Goulburn co-operative is offering a higher price per WCB share, but only on the condition that the Australian Competition and Consumer Commission gives its approval. The Commission has raised concerns that the combination could reduce competition in the raw milk market of the country.
"At this point it would appear the question is not whether Saputo will gain control, but rather at what level of ownership and at what price," Irene Nattel of RBC Capital Markets wrote in a report. Nattel also predicts that Japanese conglomerate Kirin's subsidiary Lion, which owns 9.9% of WCB shares, will eventually sell to Saputo as well.