MG board recommends sale to Saputo

27 Oct, 2017 08:25 AM
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The company’s debt level was simply too high given the significant milk loss.

BREAKING: Murray Goulburn will be sold to Canadian dairy giant Saputo for $1310 million, the company announced today.

The transaction is subject to the following conditions:

  • Approval by an ordinary resolution of MG’s voting shareholders at a MG shareholders’ meeting;
  • Australian Competition and Consumer Commission and Foreign Investment Review Board approval; and
  • Completion of other customary conditions as summarised in the appendix to this announcement.
  • MG’s chairman John Spark - the first non-farmer chair of MG who has only been in the role since April - said the company’s debt level “was simply too high given the significant milk loss”.

    “The board believes that the transaction represents the best available outcome for our suppliers and our investors,” he said.

    “Saputo is one of the top 10 dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese & Butter (WCB).

    “This transaction will crystallise real value for MG’s equity, whilst rewarding our loyal suppliers through the milk supply commitments.

    “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.

    The proposed sale, which is unanimously recommended by the board, includes a number of sweeteners for active MG suppliers, who makeup all of the company’s voting shareholders.

    These include:

  • A forward step up of $0.40 per kilogram milk solids to $5.60/kg MS for for milk supplied from November 1. This will be paid monthly in accordance with MG’s usual payment terms. MG intends to rely on the previously announced deviation from the profit sharing mechanism.
  • On completion of the transaction, the step up will be paid for milk supplied from July to October 2017.
  • An additional $0.40 per kg MS loyalty payment in 2017-18 for active MG suppliers.
  • A commitment from Saputo to collect milk from all active MG suppliers for five years from 2018-19 on terms no less favourable than MG’s existing collection terms and after this period to continue to collect milk on reasonable terms.
  • A commitment from Saputo to pay a “market competitive” farmgate milk price for a minimum of five years. This will be the greater of the WCB farmgate milk price and the average of the farmgate milk price of the two largest milk processors in the Southern Milk Region or NSW milk region (as applicable) at the relevant time.
  • A commitment from Saputo to establish a Supplier Relations and Pricing Policy Committee. This will comprise four Active MG suppliers, two WCB supplier representatives and three Saputo representatives.
  • Saputo said the purchase price was on a debt-free basis and would be financed through a newly committed bank loan.

    “The acquisition of Murray Goulburn will add to and complement the activities of Saputo's Dairy Division (Australia),” Saputo said in a statement.

    “By acquiring a well-established industry player, the company reinforces its commitment to strengthen its presence in the Australian market.

    "Saputo intends to continue to invest in its Australian platform and contribute to the ongoing development of its domestic and international business.”

    Read more:

  • Debt hanging over MG sealed its fate
  • Shock over MG announcement
  • Lino Saputo says co-ops need to do better
  • Anger at MG AGM over annoucement
  • Unit holders urged to sell now
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