The long-running battle for Australia’s oldest dairy company is continuing, with Canadian firm Saputo extending its takeover offer by almost two weeks.

The bidding war for Warrnambool Cheese and Butter has been going on for four months now and, with Bega Cheese out of the running, Canadian company Saputo and Australian farmer-owned cooperative Murray Goulburn are left to fight it out.

Saputo’s offer was initially due to close at 7:00 p.m. tonight, but has been extended to 7:00 p.m. on Wednesday January 22.

The Canadian dairy giant says it has already received a large number of acceptances, making it the largest shareholder in WCB with a 21.4 per cent stake.

The WCB board has backed Saputo’s three-tiered offer of between $9.20 and $9.60 cash per share, depending on how many shareholder acceptances it receives by the new deadline.

Saputo says all of WCB’s directors have accepted its offer by selling their own holdings.

However, financial analysts have noted that not many shares are actually left on the market, unless one of the large corporate shareholders decides to sell.

Murray Goulburn currently has a 17.7 per cent stake in WCB, and Bega Cheese is at 18.8 per cent.

The other major shareholder is Lion, which has a 10 per cent holding in WCB.

All eyes on Bega

Bell Potter Securities senior analyst Bill Richmond says all eyes are now on Bega to see what it will do with its shares.

“There’s two things they can do. They can retain that shareholding … and use it as an investment,” he said.

“Or they can accept an offer from either of the two bidders at this moment. They can also accept an offer from another party that we don’t even know about.”

Mr Richmond says either way, Bega will have made a significant profit on its shares.

He says he has not paid much attention to media speculation that Chinese buyers might be interested.

“There’s been a number of rumours around the traps that the Chinese are interested in it, and I think that that’s nothing more or less than that – just a rumour,” he added.

The Chief Executive of Warrnambool Cheese and Butter, David Lord is hoping Bega will sell its shares to Saputo.

“The fact that the Saputo offer is superior and compelling value, then it’s compelling value for all shareholders. That includes Bega, and Murray Goulburn and Lion and all of the other players,” he said.

Despite Murray Goulburn’s offer being rejected by the WCB board, the dairy co-operative has continued to plead its case to shareholders this week, saying its bid is the best for the entire dairy industry.

Its offer of $9.50 cash per share still needs approval from the Australian Competition Tribunal before the bid can go ahead.

Murray Goulburn has urged share holders to wait for the Tribunal process, saying it believes it will be successful.

However, Mr Lord believes its too risky for shareholders to accept Murray Goulburn’s bid and not just because of the uncertainty around the Tribunal process.

“The Murray Goulburn offer is conditional on it achieving a relevant interest in the company of greater than 50 per cent of WCB shares,” he explained.

“The concern that the board has for WCB shareholders is, if they decide to accept the Murray Goulburn offer and the conditions aren’t met, WCB shareholders will receive nothing for their shares, they’ll have their shares returned to them and the Murray Goulburn offer will be voided.”

Unpredictable outcome

Like all wars, the end of a battle can never be predicted.

Saputo has extended its offer, and Murray Goulburn is still entitled to acquire more WCB shares, to bring it up to an ownership level of 19.9 per cent.

While Bega is out of the race, perhaps it has been left with the most power of all – and it is still anyone’s guess as to what it will do.

The executive chairman of Bega Cheese Barry Irvin is remaining tight-lipped about the company’s plans for its stake in Warrnambool.

“We haven’t made any decisions about what we might do,” he said.

“Right the way through we’ve been comfortable with our initial investment in Warrnambool Cheese and Butter and comfortable even in our bid, we said we were happy to even be just a larger shareholder than necessarily expect to be entirely successful.

“So we would think about that in that context but, equally, obviously we think about the value of that stake being realised.”