WCB 0.00% $9.01 warrnambool cheese & butter factory co.hold.ltd

Lion buys blocking stake in WCBBusiness Date October 29, 2013 -...

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    Lion buys blocking stake in WCB
    Business Date October 29, 2013 - 6:03PM 23 reading now (22) Read later Eli Greenblat

    Japanese owned beverage and dairy company Lion has confirmed this afternoon it has barged into the three-way bidding war for Warrnambool Cheese and Butter Factory by scooping up a 9.99 per cent blocking stake in the listed dairy group.

    In a statement released just after 5pm, Lion outed itself as the mystery buyer of WCB shares today that sent the stock flying more than 10 per cent to as high as $9.30 per share.

    ‘‘Lion today confirmed that it has acquired a shareholding of 9.99 per cent in Warrnambool Cheese & Butter (WCB),’’ the company said in a statement. ‘‘Lion has enjoyed a close relationship with WCB over many years and WCB plays an important role in Lion’s cheese business.

    ‘‘Lion considers this stake a continuation and strengthening of this relationship.’’

    Advertisement Lion, which is owned by Japanese conglomerate Kirin, has thrust itself into the furious bidding war for WCB as rival takeover suitors Bega Cheese, Murray Goulburn Co-operative Co and Canada’s Saputo fight an increasingly expensive battle for control of the Victorian cheese maker with the price now hitting $500 million.

    Protecting its interests

    Lion has bought itself a crucial seat at the table through its 9.99 per cent stake in Warrnambool Cheese & Butter, with the strategic move designed to safe-guard Lion’s every-day cheese deal with the Victorian dairy group.

    Warrnambool Cheese & Butter produces all of Lion’s flagship entry level cheese brands, namely Cracker Barrel and Coon, at its Allansford plant with a Lion factory next door cutting, wrapping and sending the cheese of to its supermarket and other retail customers.

    Lion is eager for that relationship to continue if Warrnambool Cheese & Butter falls into the hands of new owners, with the everyday segment of the Australian cheese market very much reliant on low prices and constant efficiency drives to remain competitive against encroaching private label cheeses in the stores.

    Lion does not want to buy Warrnambool Cheese & Butter for itself, but rather wants to put its foot on a big enough stake so that whoever finally wins the takeover battle will have to speak to Lion and possibly give it undertakings about the continuation of its cheese production and packaging relationship.

    Lion and Warrnambool Cheese & Butter have had this relationship for many years and the profitability of the company’s everyday cheese business heavily relies on its continuation.

    Lion has an important foothold in the national dairy and cheese market in Australia with a range of milks and cheese products sold in both supermarket chains, Coles and Woolworths, as well as a range of private label milk.

    A deal announced between Coles and Murray Goulburn earlier this year will see Lion dumped as the private label milk supplier to Coles, forcing it to find a home for around 200 million litres of milk or 15 of its production.

    Lion has also racked up billions in losses from buying up dairy businesses. Kirin's paid $3.1 billion for National Foods in 2007 and bought Dairy Farmers for $910 million in early 2008.

    But it paid too much for both businesses and was forced to write-off more than $1.2 billion as tough trading conditions destroyed the goodwill.

    Read more: http://www.smh.com.au/business/lion-buys-blocking-stake-in-wcb-20131029-2wdom.html#ixzz2j65p4kA8
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