Monday, November 20, 2017
FP---Murray-Goulburn-Sells

$1.3B deal to put Murray Goulburn in Canadian hands

David Lee November 1, 2017
TRANSACTION HOPES TO PROVIDE STEP FORWARD… Pending approval, a transaction being entered into by Murray Goulburn could see the dairy giant sell to Canadian company, Saputo, for $1.3B, which Murray Goulburn chairman, John Spark believes would represent the best available outcome for suppliers and investors. Photo: Supplied.

TRANSACTION HOPES TO PROVIDE STEP FORWARD… Pending approval, a transaction being entered into by Murray Goulburn could see the dairy giant sell to Canadian company, Saputo, for $1.3B, which Murray Goulburn chairman, John Spark believes would represent the best available outcome for suppliers and investors. Photo: Supplied.

MURRAY Goulburn (MG) suppliers last week reacted with shock to news the dairy co-op had accepted a $1.3B buyout from Canadian company Saputo, but there is some hope that the deal will help repair confidence in the industry after a turbulent two years.

While the deal still needs approval from the Australian Competition and Consumer Commission and the Foreign Investment Review Board, it would see Saputo take control of all of MG’s operating assets and operating liabilities.

As part of the transaction there will be commitments in place for active MG suppliers totalling approximately $114M enabling a step up of $0.40 per kilogram milk solids (kgMS) to $5.60 per kgMS for the FY18 FMP3 for milk supplied from November 1, 2017 and, on completion of the transaction, for milk supplied from July to October 2017 and an additional $0.40 per kgMS loyalty payment in FY18 for Active MG suppliers.

MG chairman, John Spark said, “The board believes that the transaction represents the best available outcome for our suppliers and our investors. Saputo is one of the top ten dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese & Butter (WCB).

“This transaction will crystalise 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. Securing a sustainable future for MG’s loyal suppliers is 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. 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 Murray Goulburn Board.”

United Dairyfarmers of Victoria (UDV) president, Adam Jenkins said, “This agreement between Murray Goulburn and Saputo provides the industry with some clarity and a path forward to repair trust and transparency in our sector.

“The Murray Goulburn Board has ensured the deal will be the best step forward for both suppliers and industry, but it is nevertheless upsetting that we have ended up here and we feel for long-term supporters of MG who feel gutted at losing the Australian co-op.

“UDV will be watching the development of this agreement and we will be supporting our farmers throughout the process.

“The Victorian dairy industry has been built on integrity and community support, and it’s now up to Saputo to show MG suppliers a long-term vision that will help keep the sector sustainable.”

Mr Jenkins acknowledged that Saputo, which also owns Warrnambool Cheese and Butter, had built a good reputation within the industry and it is promising to have a company willing to invest $1.3B into the Victorian dairy industry.

“We’re pleased to see support for MG suppliers from Saputo in their commitment to ensure continued milk collection and in promising to maintain a strong price for milk,” Mr Jenkins said.

Mr Jenkins said the UDV would now call on Saputo and all other processors to show leadership by increasing transparency around milk pricing and showing proper regard for their impact on farming businesses and communities.

 

 

The transaction explained further

• Active MG suppliers will also benefit from a series of commitments from Saputo ensuring milk collection and market pricing into the future

• Estimated net value per share/unit of $1.10 to $1.15 after working capital adjustment and other costs, representing a 76 – 84 percent premium to the undisturbed unit price

• Estimated initial distribution of approximately $0.75 per share/unit to be paid shortly after completion (expected to be in the first half of calendar 2018)

• MG to retain all assets and liabilities associated with the MG Unit Trust and any liability in relation to the current ACCC proceedings, ASIC investigation and unit holder class action (and any similar such actions). For this reason MG will retain part of the proceeds of the transaction until the conclusion of these matters. Further cash distributions will be made following such conclusion, or earlier if appropriate