Saputo pours out $1B for Aussie dairy giant
Murray Goulburn deal expands footprint of Montreal firm amid surging demand
With a US$1 billion deal half a world away, Saputo Inc. returned to the wheeling and dealing that’s propelled the Canadian cheesemaker’s growth for decades.
The Montreal-based company agreed to acquire Australia’s biggest dairy processor, adding to its operations Down Under after taking full ownership of Warrnambool Cheese & Butter Factory Co. this year. Outside of its home market, Saputo also has factories in Argentina and the U.S.
The Murray Goulburn deal gives Saputo a bigger footprint in Australia to help meet rising dairy demand in Asia.
China’s whole milk powder imports surged in the past decade after a melamine scandal crippled consumers’ trust in locally made infant formula, and local production failed to keep up with demand. Japan is the world’s largest cheese importer, with purchases forecast at a record this year. Asia accounts for about 80 per cent of Australia’s dairy exports.
It “is a strategic acquisition for Saputo, adding sizable scale, strong domestic brands, and a robust Asia export presence to Saputo’s already attractive Australian operations,” Michael Van Aelst, an analyst at TD Securities, wrote in a research note Friday.
The price “is not unreasonable considering the potential upside of Murray Goulburn assets in the hands of Saputo management.”
The stock climbed 5.72 per cent to close at $47.48 in Toronto, its biggest jump in three months. The stock is still down two per cent this year, reflecting investors’ concern over the outcome of talks to overhaul the North American Free Trade Agreement.
Saputo is the success story of a Sicilian immigrant in 1950s Quebec, who saved his first job’s paycheques to start a family business for his father, a cheesemaker. Six decades later, the company is one of the world’s largest cheese and dairy processors, with annual sales of more than US$8 billion. Its founder Lino Saputo is one of Canada’s richest men.
Canada’s largest dairy processor beat suitors that were said to include Inner Mongolia Yili Industrial Group Co., Kirin Holdings Co.’s Lion Pty unit and China Mengniu Dairy Co. Australian producer Bega Cheese Ltd. said Thursday it was no longer a potential buyer. Units in Murray Goulburn’s listed entity soared as much as 14 per cent on Friday before closing 1.2 per cent lower.
The Australian cooperative has under-performed global peers after it cut the price it pays dairy farmers and milk production fell. It reported a A$371 million net loss in the financial year that ended in June.
The company and adviser Deutsche Bank AG had received several unsolicited indicative proposals earlier this year after announcing a strategic review.
Lino Saputo was succeeded as chief executive officer in 2004 by his son Lino Jr., who began working at the company after school from the time he was 13.
In August, the founder retired as board chairman after turning 80, delivering a speech during which he regaled shareholders with anecdotes about the company’s milestones.