Takeover target Warrnambool Cheese and Butter Factory (WCB) has rejected Bega Cheese’s $319 million offer as too low and not having a high enough cash component.
“The board of WCB, together with its advisers, has undertaken a detailed review of the offer contained in Bega’s bidder’s statement,” WCB said in a statement on Thursday.
“WCB directors unanimously recommend that WCB shareholders reject Bega’s offer.”
The WCB directors said the Bega offer did not reflect fair value for WCB shares or the strategic value of WCB to Bega.
Furthermore, the potential savings and benefits from a combination of WCB and Bega were materially higher than set out in Bega’s bidder’s statement.
WCB said the Bega offer was uncertain, opportunistic, highly conditional and might result in a potential tax liability for WCB shareholders.
WCB said it had strong prospects as a globally focused manufacturer of dairy products and a strong platform for future growth.
WCB chief executive David Lord said the Bega offer was uncertain because it partly involved a swap of Bega shares for WCB shares.
“WCB shares have a stronger outlook. Bega shares essentially have a weaker outlook,” Mr Lord told AAP.
“We believe that there are inherent risks for WCB shareholders in accepting such a big Bega scrip component.”
Bega is offering $2 cash and 1.2 Bega shares for each WCB share.
Mr Lord said there was nothing in the Bega offer that the WCB board considered sufficient.
“It doesn’t capture the fundamental value of WCB’s strategic assets and for the board, that’s paramount,” Mr Lord said.
WCB has not had any contact with Bega since Bega launched its offer on September 12.
WCB is now trying to get as much information out to shareholders as possible and was preparing detailed earnings forecasts for WCB for independent review.
Those forecasts were expected to made available to shareholders next week.
Bega already holds an 18 per cent stake in WCB.
WCB shares were two cents higher at $6.12 at 1449 AEST. Bega shares were 15 cents higher at $3.54.
