The remnant company shell left in the wake of this year’s sale of Murray Goulburn’s dairy business assets to Saputo Inc is planning to delist itself from the Australian Securities Exchange.
Costly insurance premiums associated with having the MG Unit Trust as a public entity have convinced dairy co-op directors to ask shareholders to approve the move early next year.
MG and its reconstituted “responsible entity” board are contractually required to maintain insurance for current and former directors and company officers.
Murray Goulburn, which floated part of its co-operative as its unit trust in a $500 million capital-raising move in mid-2015, has highlighted the “tightening” insurance market as a key reason for suggesting delisting.
Any reduction in future insurance premiums would benefit co-op shareholders and trust unitholders.
MG Unit shares were worth 35 cents when trust floated five years ago, hitting highs around 41c six months later, but they traded around 30c this year, slipping to 27c in recent times.
Once Australia’s biggest dairy company, MG’s business imploded after the global milk market crashed and the Australian dollar rose in 2015-16.
The co-op, strapped for cash, was unable to retain enough suppliers to keep its processing plants profitable or repay manage its debt load.
“Based on inquiries with insurance advisers, MG anticipates it could significantly reduce its future insurance premiums by delisting the MG Unit Trust from the ASX,” said a statement from the board tasked with winding up the co-op, MG Responsible Entity (MGRE).
“MG’s enquiries indicate ongoing annual insurance premiums and the final insurance premium for runoff insurance when MG is eventually wound up (following the conclusion of the Retained Litigation) are expected to be significantly lower if the MG Unit Trust is delisted from ASX.”
The actual cost savings were uncertain until annual insurances were placed with insurers by April 1.
“As run-off cover costs are a multiple of base premium, this can be a material amount,” the board said.
“The boards of MG and MGRE determined continuing the listing of the MG Unit Trust on ASX is not in the best interests of shareholders or unitholders, having regard to maintaining MG’s cash reserves for potential distribution to shareholders and unitholders.”
A shareholder vote was expected in February or March 2019.