Mystery bid for cheese maker

Sydney Morning Herald

Wednesday December 9, 2009

Eli Greenblat

THE embattled producer Warrnambool Cheese & Butter Factory is being stalked by an interested acquirer, possibly CHAMP Private Equity, as a bidder seeks control of the 120-year old company's portfolio of branded cheese, butter and cream products to forge consolidation of the dairy sector.Shares in WCB soared more than 20 per cent yesterday when it revealed the unsolicited offer, following a suspicious rise on Monday as buyers aggressively acquired almost all the stock on offer.The chairman, Frank Davis, said the bid proposal was contained in a letter sent to WCB four weeks ago.However, he declined to say who the bidder was.Neither National Foods nor the dairy co-operative Murray Goulburn are believed to be behind the bid.Speculation last night fell on CHAMP as the frontrunner but other dairy insiders said the New Zealand dairy giant Fonterra, owner of Mainland and Bega cheese and Western Star butter, and Parmalat, owner of Pauls, could also have made the approach.CHAMP's managing director, David Jones, did not return calls. Fonterra declined to comment.WCB shares - which are typically lightly traded - rose 8.5 per cent on Monday, prompting a "please explain" from the Australian Securities Exchange which led the company to reveal the takeover approach.WCB rose as high as $2.65 before closing up 44 at $2.64. It has a market capitalisation of $105.4 million.The Australian Securities and Investments Commission declined to say if it was investigating trading in the stock before the takeover announcement was made.In January the global financial crisis and collapsing commodity prices forced the producer to slash the prices paid to its milk suppliers. This triggered a series of damaging events, led by a farmers' revolt, which ultimately caused a botched capital-raising, the collapse of a joint venture project with National Foods, a string of profit downgrades and the resignation of its chief executive.Shares in WCB fell from a high of $5 to a low of $1.72 and it posted a net loss of $19.9 million for the 2008-09 financial year against a profit of $24.5 million in 2007-08. Revenue slid to $441.1 million from $525.3 million.Mr Davis said yesterday the prospects for the company had improved significantly in the past six months as it had recovered all of the milk supply volume lost early this year and its Allansford plant was at present running close to full capacity.He said the producer was chasing new business opportunities including Great Ocean Ingredients, a new operation that has been commissioned and was operating profitably.

© 2009 Sydney Morning Herald

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