Sa­puto hits town with an ul­ti­ma­tum

The Weekend Australian - - BUSINESS REVIEW - SUE NEALES AGRIBUSI­NESS

Cana­dian dairy gi­ant Sa­puto has warned the 2000 re­main­ing farmer-own­ers of cash-strapped Mur­ray Goul­burn that they face a choice be­tween ap­prov­ing its $1.3 bil­lion bid for their co-operative early next year or the busi­ness go­ing broke and into re­ceiver­ship within a year.

The deal would see Sa­puto — al­ready the third-largest dairy pro­ces­sor in Aus­tralia through its four-year own­er­ship of the War­rnam­bool Cheese & But­ter com­pany — be­come Aus­tralia’s dom­i­nant dairy en­tity, con­trol­ling a third of all milk sup­ply.

Sa­puto global chief ex­ec­u­tive Lino Sa­puto Jr, in Aus­tralia for 10 days to woo Mur­ray Goul­burn’s farm­ers and co-operative own­ers to vote for Sa­puto’s bid through a se­ries of 15 coun­try meet­ings, said his aim was to en­tice back enough farm­ers with bet­ter milk prices to boost

Mur­ray Goul­burn’s in­com­ing milk sup­ply up again to­wards 2.5 bil­lion litres.

Mr Sa­puto said the em­bat­tled co-operative had lost half its milk sup­ply in the past 18 months, with its milk pool down from 3.6 bil­lion litres in its 2015 hey­day to 1.7 bil­lion-1.86 bil­lion litres, af­fect­ing the vi­a­bil­ity of all its op­er­a­tions.

But the charis­matic Cana­dian told The Week­end Aus­tralian he was con­fi­dent he could win back enough dis­af­fected farm­ers if he was al­lowed to buy the busi­ness to keep all of its re­main­ing seven pro­cess­ing plants open.

He warned that MG’s fi­nan­cial state was so par­lous that the com­pany had less than 12 months to salvage its fi­nances be­fore it would be in­sol­vent.

“Un­for­tu­nately, MG has gone through 12-18 months of great tur­moil and some very bad de­ci­sions, but it is still very sal­vage­able as an en­tity. I think we can bring MG back to its for­mer glory,” Mr Sa­puto said in War­rnam­bool.

“In lis­ten­ing to the board, it seems MG can be sol­vent per­haps for an­other year at most, but they must find a so­lu­tion some­where along that line. I would say that it is best they and their share­hold­ers find a so­lu­tion when they are in con­trol of their as­sets ... be­cause if they don’t take the de­ci­sion quick enough, they may no longer con­trol their as­sets; it might be the banks.”

But Mr Sa­puto ad­mit­ted that even if he took con­trol of MG, the large Rochester cheese fac­tory in north­ern Vic­to­ria — in the process of be­ing shut down by MG be­cause it is op­er­at­ing at un­prof­itable ca­pac­ity, with the loss of 150 jobs — would not be re­opened.

“The plans that have been an­nounced (to close three of its 10 pro­cess­ing plants) ... we think are the right plans, in light of the (shrink­ing) milk base they have right now,” Mr Sa­puto said.

“Our in­ten­tion is to re­main on that track, op­er­ate the seven plants that we in­herit from Mur­ray Goul- burn — as well as our WCB plants — and keep shut­tered the ones that have been an­nounced, with the pos­si­bil­ity (a sale of Rochester) might even­tu­ally be on the ta­ble.”

Mr Sa­puto also pledged to re­tain Mur­ray Goul­burn’s Devon­dale milk, cheese, but­ter and cream brands, but sig­nalled its dis­as­trous ven­ture into mak­ing and sell­ing the lit­tle-known Na­traS­tart in­fant for­mula brand and other milk pow­der sa­chets into China would end.

The Aus­tralian Com­pe­ti­tion & Con­sumer Com­mis­sion said this week it would be com­plet­ing a full pub­lic re­view of the im­pli­ca­tions of the Sa­puto bid for MG, a process that may take 24 weeks.

Mr Sa­puto met with ACCC boss Rod Sims the night be­fore the shock sale deal was an­nounced to MG’s an­nual meet­ing last month.

He was con­fi­dent that ACCC ap­proval for the merger could be won, while he did not see For­eign In­vest­ment Re­view Board scru- tiny as an ob­sta­cle. “My mes­sage to MG farm­ers is that we have been in this busi­ness now in Aus­tralia for the last three years (through WCB) and we have been loyal, eth­i­cal and have paid good prices for milk,” Mr Sa­puto said.

“We be­lieve in a strong com­mu­nity of dairy farm­ers — with­out dairy farm­ers we don’t have an in­dus­try — and I want them to recog­nise that we value im­mensely what they do.”

Cross­ley dairy farmer Kar­in­jeet Singh, who at­tended Thurs­day’s meet­ing of MG farm­ers at Koroit in west­ern Vic­to­ria, said she had been won over by Mr Sa­puto’s pre­sen­ta­tion and his com­mit­ment to pay high far­m­gate milk prices for the next five years.

“This is a win-win so­lu­tion; for the first time in ages I felt that we as dairy farm­ers were be­ing treated with re­spect, and I trust and thank him for that,” Ms Singh said.

“We ac­knowl­edge the loss of our co-operative but re­ally we are all so sick and tired of the cri­sis, this seems our best op­tion — it is time to move on.”

Wool­sthorpe dairy farmer Brian McLaren, 65, who milks 720 cows and has been a MG sup­plier for 49 years, said he felt the Sa­puto sale was “done and dusted”. “Once you’ve lost your milk (sup­ply) as a pro­ces­sor, you are fin­ished; now we need to get this Sa­puto sale done be­fore MG falls over and the re­ceivers are called in,” Mr McLaren said yes­ter­day as his cows wan­dered back to their pad­docks af­ter their dawn milk­ing.

Lino Sa­puto Jr

STU­ART McEVOY

Lino Sa­puto Jr in War­rnam­bool this week as he sought sup­port for his com­pany’s buy-out of Mur­ray Goul­burn

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