Jurisdiction - Australia
Reports and Analysis
Australia – “Truth In Takeovers” For Unworkable Proposals.

18 December, 2013





  • The Panel considered Saputo and WCB were bound by statements proposing franked dividends.
  • Despite being strongly of the view there were unacceptable circumstances, the Panel accepted undertakings by Saputo to make a “last and final” statement to increase its bid, giving all shareholders at least as much value as under the franked dividends (at potentially greater cost to Saputo).

In Warrnambool Cheese and Butter Factory Company the Takeovers Panel required a bidder to pay a high price for endorsing the target’s “truth in takeovers” statements.


On 15 November 2013, Saputo announced a recommended increased offer for Warrnambool Cheese and Butter Factory Company Holdings Limited (WCB) of $9.00 cash per share. In a separate announcement released at the same time, WCB announced that it intended to declare special dividends (with associated franking credits) with a record date of 26 November 2013, subject to Saputo’s bid reaching certain thresholds. Saputo’s announcement indicated that its offer allowed for WCB to declare and pay the fully franked special dividends (of $0.46 if Saputo exceeded 50% and an additional $0.85 if Saputo exceeded 90%), in which case the offer consideration would be reduced by the amount of the dividends. Saputo stated that it intended to declare its offer unconditional, following the record date, by no later than 28 November 2013. Both announcements indicated that some WCB shareholders might receive additional value from franking credits of up to $0.56.

Ten days later, WCB announced that it had revoked its previous intention to declare the dividends and Saputo announced a simplified improved offer of $9.00 cash per WCB share, to be increased to $9.20 if Saputo exceeded 50%. Saputo also declared its offer unconditional.

The Panel said it considered that Saputo and WCB were bound by their earlier statements under the truth in takeovers policy, and was “strongly of the view that unacceptable circumstances had occurred”.

The Panel was minded to make a declaration but agreed instead to accept undertakings which it considered offered all shareholders at least as much as much value as under the proposed special dividends. Saputo undertook to extend its offer, give withdrawal rights and make a “last and final” statement to increase its offer to $9.20 on exceeding 50%, $9.40 on exceeding 75% and $9.60 on exceeding 90%.


The Panel’s decision is another instance of the Panel strongly endorsing truth in takeovers without holding parties to their statements. An earlier example is CEMEX, another case involving a dividend component of bid consideration, where delay in making the application made it difficult to hold a bidder to its “no increase” statement. The Panel has not yet given full reasons in this case, but it appears that the difficulty this time was the “essentially unworkable” structure contemplated by the statement, which meant it was not practicable to hold the parties to it. The Panel said that WCB’s intention to declare dividends and set a record date ahead of any certainty they would be paid caused confusion and disruption to the market for WCB shares. The Panel commented that the arrangements put in place were complex, created uncertainty and were most undesirable.

The result of the decision is unlikely to be welcome to the applicant, competing bidder Murray Goulburn, since it increases Saputo’s offer and makes it more attractive. Predictably, Saputo’s revised offer consideration will have different after tax impacts for different classes of WCB shareholder, as compared with the fully franked dividend component of up to $1.31 previously proposed. For example, superannuation fund investors would typically prefer to maximise the dividend/franking credit component of any consideration. On the other hand, for retail shareholders on the highest marginal tax rate, the revised after tax offer value (assuming eligibility for CGT discount) is likely to be enhanced (even where there is no CGT loss against which to offset their capital gain) by around $0.15 if Saputo exceeds 50% acceptances, $0.30 at 75% and $0.45 at 90% (although the latter two outcomes may seem remote given the opposition of Murray Goulburn (with 17.7% of WCB) and competing bidder Bega (18.4%)). A possible silver lining for Murray Goulburn is that, with Saputo’s “last and final” increase, it now knows the price it has to beat.


Ashurst Logo


For further information, please contact:


David Williamson, Partner, Ashurst
[email protected]

Gary Lawler, Partner, Ashurst
[email protected]

Bruce Dyer, Partner, Ashurst
[email protected]


Ashurst Corporate/M&A Practice Profile in Australia


Homegrown Corporate/M&A Law Firms in Australia

Comments are closed.