Saputo shares rose as investors gave a positive response to the dairy group's planned entrance into Australia with the takeover of Warrnambool Cheese and Butter Factory – although a rival bidder warned that the deal may yet fail.
Shares in Canada-based Saputo rose 4.4% to a three month high of Can$51.68 in early deals in Toronto as investors got their first chance to respond to the Aus$392.7m ($370m) offer for Warrnambool, which, tracing its history back 125 years, is Australia's oldest dairy processor.
Broker TD Waterhouse edged higher to Can$55, from Can$53, its rating on Saputo shares, while keeping a "hold" rating.
The deal, which will also see Saputo shoulder a further $71m in Warrnambool debt, is expected to close in December.
'This is our dream'
The deal fulfils a long-held desire by Saputo to set up operations in Oceania, to exploit the region's status as a major exporter to the booming dairy markets in Asia, and in particular China.
"This is our dream of ultimately having an Australian platform," Lino Saputo, the group's chief executive, said.
"We believe Australia has the ideal platform for us getting products into those emerging markets."
Importance of Oceania
Saputo was in 2008 beaten to Australia-based Dairy Farmers by Kirin Holdings, in a takeover battle in which Victoria-based giant Murray Goulburn was also an underbidder.
And the group has remained vocal in its ambitions for a deal in the region, saying in its annual report that "we recognise the importance of developing new markets within the global dairy industry, specifically in Latin America and Oceania".
The strategy of using Australia as an entre to Asia has also been followed in grains by a series of foreign acquirers, with US-based Archer Daniels Midland buying Graincorp and Canada's Viterra purchasing ABB Grain, before itself being bought by Glencore.
Meanwhile, China Investment Corporation., the Chinese wealth fund, is believed to be considering a joint Aus$190m bid, with New Zealand's Fonterra, for Tasmania-based dairy group Van Diemen's Land.
However, an advisor to Bega Cheese - which last month itself proposed a cash-and-shares takeover of Warrnambool, which rejected the offer – cautioned that Saputo may yet fail in an Australian deal again.
Bega Cheese, which already owns 18% of Warrnambool, is still in "prime position" to seal a takeover, said David Williams at Kidder Williams, which is advising Bega.
With Murray Goulburn owning too a stake reported at more than 17%, the "chance" of Saputo achieving the 50.1% of shares it needs to win the takeover are "slight", Mr Williams told Data Room.
He added that "we're still pretty confident in our bid", which at the close of trading on Monday valued Warrnambool shares at Aus$6.20, below Aus$7.00 a share being offered by Saputo.
Mr Williams said that for farmers, which hold a considerable portion of Warrnambool stock besides supplying milk to it, the benefits of a "better" milk price, "something Bega can deliver", would prove an important factor.
'Consider its options'
Some observers have proposed that Murray Goulburn itself may yet emerge as a rival suitor.
The co-operative said on Tuesday that "as Australia's largest dairy foods company, processing one-third of Australia's milk and as a major shareholder in Warrnambool, Devondale-Murray Goulburn will now take time to consider its options".
Murray Goulburn is believed to have made at least three unsuccessful approaches to Warrnambool in the last five years.
Warrnambool shares finished up 11.2% at an all-time closing high of Aus$7.18 in Sydney, where Bega Cheese stock ended down 2.2% at Aus$3.50.