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