Another slice off the cut loaf.


Years ago there was a line in the film “Breaker Morant” where the breaker, played by Bryan Brown said of a young ladies virtue “another slice off a cut loaf will not be missed” .

I never forgot the line, and have used it often, usually to make the point that a collection of small, and in themselves insignificant changes all added up eventually make a big difference. Just like a loaf, one slice may not be missed, but lose some more, and soon enough you have no loaf left.

The treasurer approved the takeover of Warnambool Cheese and Butter (WCB) earlier today by the Canadian group Saputo, should the current take-over squabble turn out in their favour

The original Saputo offer of $7.00/share has now been upped to a current $8.00 with current share price well north, there is anticipation of further action by Bega Murray Golbourn, or Fonterra.

It is now inevitable that WCB will cease to be an independent dairy processor, it just remains to be determined if it will be owned domestically or by an international entity.

The WCB directors have done a pretty good job by their shareholders, their shares are now trading at 8.50, after being stuck around $4  for a considerable period up till July, after some pretty crap results. This is despite being a strategic supplier in an industry with demand growing strongly, particularly in Asia.

There is a bit to go, but WCB is as good as no more. Now to the offer of ADM for Graincorp, a decision slated for December 17, and feted as the more important of the two decisions due to the competitive stranglehold Graincorp has on grain handling infrastructure in the eastern states. If nothing else, the pathetic blustering of Warren Truss , and acerbic one-liners from Barnaby Joyce will be worth waiting for.

The real concern however, is the long term impact of having major food producing industries controlled overseas. Without being in the least bit xenophobic, and recognising that Australia simply does not generate enough capital to fund all the demand for capital in the economy, it cannot be healthy for the prospects of our grandchildren to be so beholden to the overseas boardrooms who control the food supply chains.

Stop the presses:

Murray Goulburn has made a further offer for WCB on Thursday 14th of $9/share, a substantial premium over the current Saputo $8/share offer, and over the closing price of $8.50 on the exchange. This is pretty heady stuff for a business that has consistently failed to deliver adequate returns to shareholders for some years, and it is hard to see how Saputo can go much further without the rationalisation benefits that MG would have.


Stop the presses, again!

It is Sunday 17th, not a day of rest in the dairy industry. Murray Goulburn has indicated that they will beat the latest Saputo offer, price to be announced, but they have the hurdle of competition policy to jump, stupid as that is in these circumstances. So, the deleriously happy WCB shareholders have the choice of taking the uncondituional Saputo offer now, or waiting a bit to see what MG has in store. Meanwhile, Bega have upped their bid, but it is below the Saputo bid, so is essentailly irrelevent. However, what is not irrelevent is the Bega shareholding in WCB, which along with that of MG and Fonterra add up to around 40% of WCB.

Whatever happens to WCB this coming week, Bega will come into play as soon as the dust has settled, perhaps sooner, as it is the only available Australian dairy asset left bigger than a few cows and a bathtub. 

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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2 Responses to Another slice off the cut loaf.

  1. Pingback: Toyota’s tent joins Ford and GM in the boot. | StrategyAudit

  2. Pingback: WCB spits the curd | StrategyAudit

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