Saputo acquires MG
Embattled dairy processor Murray Goulburn is selling up shop.
The former Australian dairy giant on Friday entered in to a bidding agreement with Saputo Dairy Australia, which will acquire all of MG’s operating assets and liabilities for $1.31 billion.
For the transaction to go through, approval from voting shareholders, the ACCC and FIRB and completion of other customary conditions are needed.
This is expected to be completed by the middle of next year.
The announcement, which came just hours before MG’s annual general meeting, was met with mixed feelings by suppliers and shareholders.
MG chairman John Spark said the board believed the transaction represented the best available outcome for 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 and Butter,’’ he said.
‘‘This transaction will crystallise real value for MG’s equity, whilst rewarding our loyal suppliers through the milk supply commitments.
‘‘MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss.’’
Mr Spark said securing a sustainable future for MG’s suppliers was of ‘‘paramount importance to the board’’.
‘‘We are pleased with the strong milk commitments secured as part of Saputo’s offer to reward this loyalty,’’ he said.
‘‘Saputo has demonstrated itself to be a credible and trusted partner for Australian dairy farmers through its investment in WCB.
‘‘The transaction has the unanimous support of the MG board.’’
The transaction will also include a sweetener for active MG suppliers totalling about $114 million.
This will enable a step up of 40¢ per kilogram milk solids (kgMS) to $5.60 per kgMS for milk supplied from November 1 and, on completion of the transaction, for milk supplied from July to October 2017.
It also enables an additional 40¢ per kgMS loyalty payment in the 2018 financial year for active MG suppliers.
MG suppliers will also benefit from a series of commitments from Saputo ensuring milk collection and market pricing into the future.
MG supplier director Craig Dwyer said at the annual general meeting that some suppliers could see this deal as ‘‘far from ideal’’.
‘‘I signed up to fix MG, not to sell it,’’ he said.
‘‘The reality hit us and forced our hand. This is not where we want to be but where we are.
‘‘After conversations with the Federal Government the decision was reached that it was not an industry problem but an MG problem.’’
Mr Dwyer said the sale would ensure certainty for MG’s wet suppliers.
‘‘This deal ensures there is a future for Murray Goulburn farmers going forward,’’ he said.
MG will retain all assets and liabilities associated with the MG Unit Trust and any liability in relation to the current ACCC proceedings, ASIC investigation, unit holder class action and any similar actions.
MG will retain part of the proceeds of the transaction until the conclusion of these matters.
The National Union of Workers, which is the union for MG workers, has cautiously welcomed the sale.
‘‘The NUW hopes this gives workers and their communities some certainty as they go forward,’’ Victorian secretary Gary Maas said. ‘‘The NUW already works productively with Saputo at its Warrnambool Cheese and Butter Plant.
‘‘It is sad, however, to see a co-operative that has served farmers, workers and communities well for decades disappear.
‘‘Murray Goulburn has suffered from previous mismanagement, the demise of which can be traced back to the de-mutualisation push a few years ago.
‘‘We expect that they (MG workers) will continue to make the high quality products that we love through any approved acquisition by Saputo.’’