Lion pounces on $50m stake, emerging as master of Warrnambool’s fate

JAPANESE-OWNED brewing and dairy major Lion has become the kingmaker in the race to acquire Warrnambool Cheese & Butter, snatching a 10 per cent stake in a sharemarket raid yesterday but signalling it won’t proceed with a full takeover offer.

Lion yesterday stood in the market buying WCB stock at $9.25 apiece — a 16 per cent premium to the $8 bid WCB has recommended from Canadian dairy giant Saputo — eventually laying out more than $50 million for a 9.99 per cent stake in the company.Authentic Nfl Jerseys Cheap

The buying frenzy, which saw WCB shares surge as much as 11 per cent to a record high of $9.30, marked the stock’s busiest day since listing on the Australian Securities Exchange in 2004, with 6.3 million shares changing hands. Shares later closed at $8.80.

Yesterday morning broker RBS Morgan stood in the market for two hours, picking up the stock. Wilson Asset Management, which bought into WCB at about $4 a share in July, sold a stake of close to 1.5 per cent to Lion yesterday at $9.25 a share, and is believed to have netted a gain of about $4m.

Wilson chief investment officer Chris Stott said the bidding war under way for WCB was a rarity in today’s equity market. “The WCB assets are a one-in-a-generation type of asset, so it’s not surprising to see a heightened level of interest from the people that have announced takeover bids so far, and it will be interesting to see the intentions of the people that have bought in today,” Mr Stott said.Nike Nfl Jerseys Cheap

Lion, a subsidiary of Japanese brewing giant Kirin, confirmed later in the day it was behind the purchases, as the company looked to shore up its strategic supply agreement with WCB, highlighting the tightness of supply in the Australian market.

“Lion has enjoyed a close relationship with WCB over many years and WCB plays an important role in Lion’s cheese business,” the spokeswoman said. “Lion considers this stake a continuation and strengthening of this relationship.”

The stake gives Lion a seat at the table and is not expected to be a precursor to another bid but preserving its existing manufacturing agreement with WCB, which produces the bulk of the cheddar cheese Lion sells under the Coon and Cracker Barrel brands.

Lion, which bought dairy processor National Foods in 2007 and NSW co-operative Dairy Farmers in 2008, has struggled to wring an acceptable return from its dairy assets, which have soaked up $350m in integration costs, including the consolidation of its dairy and fruit juice plants from 29 to 19.Wholesale Nfl Jerseys

In acquiring a blocking stake in WCB, Lion may effectively choose the victor in the takeover race, using this as leverage to extract good deals for itself.

The company next year loses a 200 million litre annual supply contract with Coles supermarkets in Victoria, NSW and southeast Queensland, after it was underbid by the Murray Goulburn Co-op.

WCB has agreed to accept Saputo’s $8 per share bid in the absence of a superior offer, but is also being stalked by rival dairy processors Murray Goulburn, which has offered $7.50, and Bega Cheese, whose offer of $2 cash and 1.2 of its own shares valued WCB at $7.00 per share based on yesterday’s closing price of $4.17 for Bega shares.

Both Murray Goulburn and Bega have stakes of about 17 per cent in WCB, and both are likely to seek to use their holdings to extract sweetheart deals in the event they were to miss out on the acquisition.

Meanwhile New Zealand giant Fonterra confirmed it had appointed Reunion Capital Partners to advise it on the “current corporate activity in the dairy sector” but refused to confirm or deny if whether was involved in any merger and acquisition discussions.

Lion is the third-largest player in the Australian dairy industry, processing 1.2 billion litres of milk annually, behind Murray Goulburn on 3.1 billion litres and Fonterra on two billion litres. WCB processes about 900 million litres a year and Bega just 650 million.

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