MONTREAL (The Canadian Press) — Dairy and cheese giant Saputo may need to improve its bid to secure its bid to buy one of Australia's largest milk processors.
The Montreal-based company has entered into a C$378-million agreement to buy purchasing Warrnambool Cheese and Butter Factory Company Holdings Ltd.
But Rival Australian bidder Bega Cheese Ltd submitted an unsolicited Sept. 12.
Saputo (TSX:SAP) is offering about AUD$7 (C$6.81) in cash per share for all outstanding shares in Warrnambool.
The board has unanimously recommended that shareholders accept the offer, unless it obtains a better one.
Bega offered a cash and share offer at an implied price of AUD$6.30 per Warrnambool share.
Mark Petrie of CIBC World Markets doesn't believe Saputo's price will be enough, due to Bega's continued interest and 18 per cent equity stake.
Warrnambool's shares exceeded Saputo's offer in Tuesday trading, closing up 11.15 per cent at AUD$7.18, implying that another bid is expected.
Analysts expect Warrnambool would add seven to nine cents per share in earnings for Saputo.
Saputo has been eyeing a takeover of the Australian dairy for years as it looks to expand its cheese empire to serve the Asian market, which is currently supplied by Argentina.
Faced with intensified competition and limited growth opportunities in Canada, the company has focused on expansion in the United States, Latin America and Oceania.
Chief executive Lino Saputo Jr. has repeatedly said the company has about $2.7 billion in financing, enough financial firepower to support one or several deals.
Saputo's investors welcomed the expansion plans, pushing the company's stock up $1.75 or 3.5 per cent at $51.23 in midday Tuesday trading.