MURRAY Goulburn chairman John Spark announced at the co-op’s AGM on Friday that it has accepted a $1.31 billion buyout from Canadian company Saputo.
Acknowledging that many suppliers and their families would be sad to see the cooperative go, after generations of support and involvement, MG’s CEO Ari Mervis spoke of the challenges facing the cooperative, including its uncompetitive farm-gate milk price, very unpopular Milk Supply Support Package, footprint and cost rationalisation requirements, and the need to restore supplier trust.
Mr Mervis said the resulting business initiatives undertaken by the cooperative, including a strategic review, resulted in MG’s board receiving various confidential unsolicited inbound proposals.
These proposals included the offer from Saputo Dairy Australia to buy all of MG’s operating assets and operating liabilities.
Mr Spark gave the meeting an overview of binding agreement MG has entered into with Saputo, outlining MG’s and Saputo’s milk supply commitments, as well as the transaction value to shareholders and unitholders.
Mr Spark said MG will retain all assets and liabilities associated with the MG Unit Trust and any liabilities in relation to the current ACCC proceedings, ASIC investigation and unitholder class action (and any similar such actions).
He said the board considered various criteria in assessing external proposals, such as the value of the proposition, FMP impact, supplier representation, and certainty and speed.
Mr Spark said the board had concluded that the transaction with Saputo “is in the best interests of MG shareholders”.
“The directors of MG unanimously recommend that shareholders vote in favour of the transaction with Saputo,” he said.
“I appreciate the last two years have been an immensely challenging period for the co-operative and our loyal suppliers, and am aware that some believe the co-operative should remain a standalone business.
“However, the fact is that tangible, certain benefits will be delivered from the transaction with Saputo and are far above what can be achieved should MG remain in its current form without access to additional capital.”
The transaction is subject to approval by an ordinary resolution of MG’s voting shareholders and other customary conditions including ACCC and FIRB approvals.
No action was required by shareholders at the AGM; an extraordinary shareholders meeting to vote on the transaction will be held in early 2018.
If approved and conditions met, the transaction will be completed in first half of 2018.
While many suppliers at the meeting were shocked and saddened by the announcement, Victoria’s peak dairy farmer group, the United Dairyfarmers of Victoria (UDV), is hopeful the deal will help repair confidence in the industry after a tempestuous two years.
“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,” UDV president Adam Jenkins said after the meeting.
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 $1.3 billion 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,” he 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 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,” he said.