Dairy Crest trumps Wiseman with improved bid for Unigate

The bid battle for Unigate's dairy and cheese business took a fresh twist yesterday with Dairy Crest offering a cash alternative of £235m to its all-share deal. The improved bid, which came after the markets had closed, trumped an earlier £225m offer from Robert Wiseman, the Scottish milk group.

However, analysts did not rule out Wiseman coming back with revised terms. Wiseman said it noted Dairy Crest's offer and advised shareholders to take no action.

Wiseman said weeks ago that it was interested in making a counter offer to the agreed deal between Unigate and Dairy Crest. The Scottish company's £225m offer included a cash payment of £125m while the group would also take on £100m of debts from the Unigate business.

This beat Dairy Crest's original offer, which was an all-shares deal worth around £205m. But Dairy Crest's move to offer a higher cash alternative puts it back in the driving seat. It is offering £135m cash, equivalent to 59p per share, plus the assumption of the debt.

Analysts said Dairy Crest could afford to pay a higher price because the overlap between its own businesses and those of Unigate would enable it to derive £25m of annual cost savings from a merger.

This would compare with annual savings of £10m from Wiseman, which has no cheese operations and has limited exposure to the doorstep milk delivery business.

Wiseman disputed the importance of cost savings, saying its business would have a good geographic fit with Unigate's. It claimed it had sufficient firepower with funding of £325m.

The Wiseman approach means it is bidding for a business three times its size. The Government said on Wednesday it would not refer Wiseman's proposed acquisition to the Competition Commission.

The deal would make Dairy Crest first or second position in every dairy sector in Britain. Unigate shares closed 5p higher at 300p.