EXECUTIVE chairman of Bega Cheese Barry Irvin said the company is in a good position to acquire Victorian dairy processor Warrnambool Cheese and Butter despite better offers from rivals.
His confidence in Bega Cheese’s offer came after this week’s annual general meeting where Bega’s shareholders voted to change the company’s constitution to raise the shareholder cap.
Previously the constitution prohibited any shareholder holding more than a 10 per cent stake in Bega Cheese.
Theoretically this could have stopped the share swap contained in Bega Cheese’s offer for WCB, in which 1.2 Bega Cheese shares and $2 cash would be exchanged for every WCB share.
“Shareholders at Tuesday’s AGM were very curious what was happening with Warrnambool and obviously supportive of the resolution to change our constitution,” Mr Irvin said.
“To take off the share cap was one of the conditions we had on our bid, which was a good indicator to us of what our shareholders are thinking.
“If there had been significant dissent it would have told us the shareholders weren’t keen, but that definitely wasn’t the case.”
Only 2.3 per cent of shareholders voted against the constitutional change.
Despite the WCB board urging its shareholders to reject Bega Cheese’s bid, Mr Irvin said the company is still confident about acquiring the business ahead of Australian rival Murray Goulburn and Canadian competitor Saputo.
“We’re expecting clearance from the ACCC [Australian Competition and Consumer Commission] in the next week and we are way in advance of the other bidders, in terms of a bid that has documentation attached to it and can be accepted.
“We don’t feel any pressure to make a decision in the next 24 hours to change our bid, but we reserve our right to do so.
“Time is on our side.”
With WCB shares rising as the three-way contest for ownership has emerged, the Bega bid is now valued at $385million, close to Saputo’s all cash $392million offer.
Mr Irvin said although acquiring WCB would “grow a strong Australian listed dairy company”, he noted there were many other ways Bega Cheese was expanding revenues for shareholders.
“There are so many very exciting initiatives going on here,” he said.
“At the AGM we talked in terms of us building our own infant formula processing and canning facility.
“We talked about a major project at the Lagoon St where we’ll see a very large capital expenditure probably in the area of $15 to $20million in our whey dryer to produce demineralised whey for infant formula, and that’s a high value ingredient so it’s important.
“We have any number of those significant profit-building and revenue-building projects planned so this business is going to grow and it will be more profitable regardless of the outcome of the WCB bid.”
Mr Irvin was also confident Bega Cheese would not be in same situation as WCB as it faces a possible foreign buy-out
“At the end of the day it is always a decision for shareholders, but the way I guard the company is the way I have always guarded it, to make sure it’s high performing and to make sure it does a good job for the shareholders.
“I am very respectful of the fact I’m a servant to the suppliers and the shareholder, and the decision will always ultimately be theirs, but we have a great record of delivering value.
“I have quipped in the past that a successful business will always mean that people are interested in it.
“But I emphasise that this business is not for sale,” he said.