EMBATTLED dairy processor Murray Goulburn is selling up shop.
The once Australian dairy giant entered into a bidding agreement with Saputo Dairy Australia on Friday with the company to acquire all of MG’s operating assets and liabilities for $1.31 billion.
For the transaction to go through, approval from voting shareholders, approval from the ACCC and FIRB and completion of other customary conditions are needed.
This is expected to be completed by the middle of next year.
The announcement, which came just hours before MG’s annual general meeting, was met with mixed feelings by suppliers and share holders.
MG chairman John Spark said the board believed the transaction represented the best available outcome for suppliers and investors.
‘‘Saputo is one of the top ten dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese and Butter,’’ he said.
‘‘This transaction will crystallise 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.’’
Mr Spark said securing a sustainable future for MG’s suppliers was 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,’’ he said.
‘‘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.’’
The transaction will also include a sweetener for active MG suppliers totalling approximately $114 million.
This will enable a step up of $0.40 per kilogram milk solids (kgMS) to $5.60 per kgMS for milk supplied from November 1 and, on completion of the transaction, for milk supplied from July to October 2017.
It also enables an additional $0.40 per kgMS loyalty payment in the 2018 financial year for active MG suppliers.
Active MG suppliers will also benefit from a series of commitments from Saputo ensuring milk collection and market pricing into the future.
MG supplier director Craig Dwyer said at the AGM that some suppliers may see this deal as ‘‘far from ideal’’.
‘‘I signed up to fix MG not to sell it,’’ he said.
‘‘The reality hit us and forced our hand.
‘‘This is not where we want to be but where we are.
‘‘After conversations with the federal government the decision was reached that it was not an industry problem but an MG problem.’’
Mr Dwyer said the sale will ensure certainty for MG’s wet suppliers.
‘‘Hopefully this has mapped out a future for our suppliers and that there is some clarity going forward,’’ he said.
‘‘This deal ensures there is a future for Murray Goulburn farmers going forward.’’
MG will 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.