Saputo bids $378-million for Australian milk processor

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Dairy processor Saputo Inc.'s $378-million bid for Warrnambool Cheese and Butter Factory Company Holdings Ltd. of Australia may not be the last word.

Montreal-based Saputo said late Monday it is offering about $7 (Australian)-per-share in an all-cash deal for all of the outstanding shares in Warrnambool, one of Australia's biggest milk-and-cheese processors.

Saputo says Warrnambool's board has unanimously recommended that shareholders accept the proposed transaction.

But analyst Mark Petrie of CIBC World Markets said in a research note Tuesday that Saputo's offer could be bested by a richer proposal.

Mr. Petrie points out that Saputo's bid is higher than a cash-and-share proposal put forward by Australia's Bega Cheese Ltd. on Sept. 12, but that Bega could well return with a counter-offer.

"While the board has recommended shareholders accept the bid, we do not believe it is likely to go through as is due to Bega's continued interest and 18 per cent equity stake. Warrnambool's shares have already traded through [Saputo's] offer price, implying another bid is expected," he said.

Also holding a significant stake in Warrnambool is Australia's Murray Goulburn Co-operative, with more than 17 per cent of the shares, Desjardins Securities analyst Keith Howlett said in a note Tuesday.

Mr. Howlett says that – if Saputo is successful with its current bid – the acquisition would be seven to nine cents (Canadian) accretive to earnings-per-share in the first full year.

"The proposed takeover of Warrnambool of Australia would represent the opening gambit into the low-cost Oceania dairy shield (milk-producing region), which is geographically well-situated to serve Asian markets where the consumption of dairy products is growing," he said.

Saputo is Canada's largest dairy processor and the second biggest in North America. It is also present in Europe and Argentina.

Growth-by-acquisition has been a key part of its corporate strategy.