Warrnambool plays its cards safe

Takeover action could be starting to heat up in the local market.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Warrnambool Cheese & Butter Factory (ASX: WCB) has today released a brief statement to shareholders advising it to "Take No Action" in relation to the unsolicited and conditional takeover bid by Bega Cheese (ASX: BGA).

Bega's offer of 1.2 Bega shares plus $2 cash for every Warrnambool share has led to Warrnambool's share price soaring 35% in the past five days. In response to the bid, the board of Warrnambool appear to be playing its cards safe by highlighting that it will "consider whether Bega's Offer adequately reflects the value of the WCB business today, the expected future earnings uplift from initiatives underway and the improving market conditions. Given the highly favourable outlook for WCB, we consider the timing of the Offer to be highly opportunistic."

Meanwhile, in announcing the bid Bega's Chairman Mr Barry Irvin suggested that "the benefits for each company's shareholders, many of whom are farmer supplier shareholders, are highly attractive. Both groups of shareholders will access the synergies that can be realised by a successful merger, which we estimate will be $7.5 million per annum."

The bid for Warrnambool comes at a time of increased capital market activity. Not only is there increased chatter regarding a number of pending initial public offerings that may shortly launch but a three-way tussle between financial services firms IOOF (ASX: IFL), Equity Trustees (ASX: EQT) and Perpetual (ASX: PPT) for Trust Company (ASX: TRU) continues to heat up as each suitor jockeys for a winning position.

Foolish takeaway

Not only do a number of acquisitions based on realising synergies make sense for companies to undertake — particularly in a low growth environment — but buying into companies after a takeover is announced can often make sense for savvy investors too.

As has been the case since the initial approach by Equity Trustees to Trust Company, a takeover or merger offer can often bring other interested parties out into the open and lead to further offers above that at which the initial one was pitched. Savvy investors can often find opportunities amongst takeover situations to boost their portfolio's performance.

High dividend-paying stocks are another great way to boost portfolio performance. Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool contributor Tim McArthur owns shares in Perpetual.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »