December 23, 2013

Driven by strong international dairy demand and pricing, a falling Australian dollar and an improved product mix, Australia's Warrnambool Cheese and Butter Factory Holdings Co, which is backing a bid from Canada's Saputo Inc., will double its first-half earnings in 2014.

Chairman Terry Richardson said the first half would provide a "robust foundation" for the balance of the year.

Earnings before interest, tax and depreciation and amortisation (EBITDA) in the six months to December 31 would rise around 100% from AUD29.3 million (US$25.94 million) in the previous corresponding half, the company said. Full-year EBITDA is pegged at between AUD47 million and AUD52 million (US$42 million and US$46.5 million), compared with AUD25.5 million (US$22.8 million).

Saputo earlier this week increased its unconditional cash offer of AUD515 million (US$460.6 million) to as much as AUD549 million (US$491 million) if it receives acceptances of 90% or more of Warrnambool shareholders.

As of Monday (Dec 16), Saputo had received acceptances worth 16.9%, taking it close to the 18% stakes held by each of Murray Goulburn and Bega.

Bega, which kicked off the takeover war with a bid in mid-September but has since lagged the more aggressive Murray Goulburn and Saputo, appeared to pull out of the race altogether this week.

Bega said it would not extend its offer period beyond Friday (Dec 20) and would instead "consider its options regarding its strategic shareholding", a review that could include a sale of the stake.

That would leave Murray Goulburn as the only competitor to Saputo, but its AUD530 million (US$474 million) offer is conditional because it requires competition regulatory approval that could take months. Saputo's offer, meanwhile, is due to close on January 10.

Warrnambool shares were up 0.4% at AUD9.23 (US$8.25), while Bega shares were down 2.2% at AUD4.39 (US$3.93) in a broadly higher market. It is due to report its interim results on February 28.