December 2017

AUSTRALIA
Canada’s Saputo to acquire Murray Goulburn dairy co-operative
Canada’s dairy company Saputo has
entered a binding agreement with Murray
Goulburn co-operative, which will see
it acquire all of the operating assets
and liabilities of MG for approximately
AUD $1.31bn.
The transaction was unanimously
recommended by the MG board directors
and is subject to approval by regulators
as well as an ordinary resolution of MG’s
voting shareholders.
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, while rewarding
our loyal suppliers through the milk
supply commitments.”
He added: “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 MG Board.”
With this transaction, MG announced
new commitments regarding milk supply
to Active MG suppliers. The business
will step up the fiscal year (FY) 2018
farmgate milk price by $0.40 per kg MS to
$5.60 per kg MS for milk supplied from 1
November 2017.
In addition, MG will give suppliers a
$0.40 per kg MS retrospective back pay
amount in respect of all qualifying milk
solids supplied between 1 July 2017 and
31 October 2017, reflecting the difference
between MG’s current FY18 farmgate milk
price of $5.20 per kg MS and $5.60 per kg
MS. Active MG Suppliers will also receive
a $0.40 per kg MS loyalty payment for all
milk supplied in FY18.
Saputo has committed to collect milk
from all active MG suppliers for five years
from the FY19 season on terms no less
favourable than MG’s existing collection
terms. The Canadian company also agreed
to pay Active MG Suppliers a market
competitive farmgate milk price for the
same period.
Regarding representation, once
the transaction is completed and
MG is wound up, Saputo will establish
a supplier relations and pricing
policy committee. This will comprise
four active MG suppliers, two WCB
supplier representatives and three
Saputo representatives.
Earlier this year, the Australian
Competition and Consumer Commission
launched Federal Court proceedings
against Murray Goulburn and its former
chief executive over claims they misled
and mistreated farmers.
Another class action was filed last year
by investors who claim MG misled the
market ahead of its float last year. MG
will be wound up after the conclusion
of the case.
MG intends to make an estimated
initial distribution of the net transaction
proceeds of approximately AUD $0.75 per
share and unit, to be paid shortly after
completion. Further cash distributions to
shareholders and unitholders are expected
upon conclusion of the regulatory actions
and class action.
“The recent events at MG demonstrate
that co-ops must have a strong balance
sheet in order to support family farming.
MG took an understandable path to look for
external financing,” said Melina Morrison,
chief executive of the Business Council of
Co-operatives and Mutuals (BCCM), the
apex body for Australia’s co-ops. “That’s
not an unusual thing for co-ops to do.
Co-ops are a successful business model but
can be constrained when it comes to
funding for growth.
“But the options are limited for co-ops
and mutuals, and that leads to innovative
thinking and unique solutions that are
untested. As an industry organisation,
our role remains to open up options for
co-ops in Australia to secure funding
through changes to legislation and
through greater education and awareness
that do not lead to the inadvertent
corporatisation.”
16 | DECEMBER 2017