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Warrnambool CEO Says Stalemate Possible in Cheese M&A Tussle

Warrnambool Cheese & Butter Factory Co., the Australian target of a two-way takeover battle, says a stalemate is possible between rival suitors for the nation’s oldest dairy producer.

“The prospect of a stalemate is a possibility,” Warrnambool Chief Executive Officer David Lord said today in a phone interview. “If in the future we ended up with a share register, which was altered in a major way and we had a number of major, large shareholders, then we would continue to manage the business in the interests of all the shareholders.”

Warrnambool shares are trading below bids by Saputo Inc., Canada’s biggest milk processor, and Victoria state-based Murray Goulburn Cooperative Co. The fate of the bids may rest with Bega Cheese Ltd., Murray Goulburn and Kirin Holdings Co., which hold a combined total of about 46 percent of Warrnambool, according to data compiled by Bloomberg.

Saputo, which holds 18 percent, is unlikely to gain control of the producer without capturing at least one of the other major stakes, according to Mark Topy, a Melbourne-based analyst at Canaccord Genuity Corp. “The Bega holding is now pivotal, whoever can get that Bega holding, if they do sell, will be across the line,” Topy said by phone. Bega holds 18.8 percent of the dairy producer, Warrnambool said Jan. 7.

Warrnambool declined 0.7 percent to A$9.14 at the close in Sydney. Saputo will pay a maximum A$9.60 cash a share on the condition it gains more than 90 percent of Warrnambool, the Montreal-based company said Dec. 17 in a statement. The offer trumps a A$9.50 bid from Murray Goulburn, which requires approval from the Australian Competition Tribunal to complete any deal.

Saputo’s offer is scheduled to close on Jan. 10, the Canadian producer said in its statement.

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