Tassie benefits from MG sale
THE planned sale of milk processor Murray Goulburn to Canadian company Saputo Inc should help ease uncertainty for Tasmanian suppliers.
In a statement to the Australian Securities Exchange, Murray Goulburn announced it has entered into a binding agreement with Saputo Dairy Australia for the sale of the company for $1.3 billion.
While a cloud still hangs over the future of the Edith Creek processing factory, the proposed deal should give Tasmania’s MG suppliers some confidence.
As part of the sale agreement Saputo would take on MG’s supply commitments worth $114 million.
This will allow suppliers to receive a price step up of $40 cents a kilogram of milk solids for milk supplied from November 1, taking the full year price to $5.60c/kg/Ms.
If the deal goes ahead there will also be a back payment for milk supplied from July through to October.
Existing MG suppliers will also receive an extra 40c/kg/ Ms loyalty payment.
Saputo already has a strong presence in the Australian dairy industry after buying the Warrnambool Cheese & Butter business in 2014.
The Saputo deal was unanimously recommended by the MG board and if approved will be finalised in the first half of 2018.
MG chairman John Spark said the board believed that the sale represented the best available outcome for the company’s suppliers and investors.
“Saputo is one of the top 10 dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese & Butter,” he said.
Mr Spark said MG has reached a position where, as an independent company, its debt was simply too high given the significant milk supply loss.
“Securing a sustainable future for MG’s loyal suppliers is of paramount importance to the board,” he said.
“We are pleased with the strong milk commitments secured as part of Saputo’s offer to reward this loyalty.”
Before the sale can be finalised it must be approved by the Australian Competition and Consumer Commission and the Foreign Investment Review Board.
Tasmanian Farmers and Graziers Association dairy council chairman Andrew Lester said overall the proposed sale was a good outcome.
“When you look at if from an Australian based co-op point of view it is a shame, but that’s about the only negative I can see with it,” Mr Lester said.
“As far as the supplier shareholders are concerned, I think with the situation MG had got itself into, this was probably the best option they could hope for.”
The deal must also receive approval from MG’s voting shareholders before it can go ahead.
“We don’t know at this stage if it's going to be accepted and I guess if another offer came forward they would have to consider that too,” Mr Lester said.
“The prices they’re offering to suppliers now are competitive. The predictions for next year aren’t overfly positive and there will be some challenges there, but they are not going to be as big as the challenges would be if things continued how they were with MG in its current structure.”