MG shareholders approve sale to Saputo

05 Apr, 2018 03:25 PM
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Murray Goulburn lost the mantle as the nation's biggest milk processor, reporting in February that its milk intake was down nearly 30 per cent to 1.1 billion litres in the six months to December 31.
Now it is time to turn to the future.
Murray Goulburn lost the mantle as the nation's biggest milk processor, reporting in February that its milk intake was down nearly 30 per cent to 1.1 billion litres in the six months to December 31.

It was a momentous day in the 68-year history of the Murray Goulburn Co-operative, as farmer shareholders voted in favour of the $1.3 billion takeover by Canada's giant Saputo.

Earlier this week the Australian Competition and Consumer Commission paved the way for the sale of what was once Australia's largest dairy company after Saputo agreed to sell the Koroit plant.

The ACCC chairman Rod Sims had thrown up a red flag over the deal citing issues with the purchase of the Victorian milk plant in early March.

It has been a difficult few years for Murray Goulburn farmer suppliers - many of whom were initially against the deal - but one which the dairy processor says is key to its survival.

Murray Goulburn lost the mantle as the nation's biggest milk processor, reporting in February that its milk intake was down nearly 30 per cent to 1.1 billion litres in the six months to December 31. Revenue fell $1.1 billion, down 5.1 per cent.

It warned that if the Saputo deal failed, the group's uncompetitive milk price may lead to further milk losses, trigger impairments and covenant breaches and the potential loss of creditors' support.

At the EGM on Thursday in Melbourne, Murray Goulburn chairman John Spark said all four resolutions were passed including the asset sale to Saputo, the 80¢ per share distribution to Murray Goulburn shareholders, and the 80¢ per share capital return to non-voting Murray Goulburn shareholders, as well as the amendments to the constitution to reflect its changed operations.

Mr Spark told shareholders that Saputo has demonstrated to be "a credible and trusted processor" in Australia through its investment in Warrnambool Cheese & Butter, providing him with confidence that it would honour all its commitments to suppliers going forward.

He explained that once the transaction completed, Murray Goulburn would continue to exist and would hold certain non-operating assets and liabilities - essentially cash, retained litigation and a number of subsidiary companies that are not part of the operating business acquired by Saputo.

?"MG will continue to own the Responsible Entity, which will continue as the trustee of the MG Unit Trust," he said.

"A reduced board of five directors will manage the Retained Litigation and MG's ongoing reporting and compliance obligations until the Retained Litigation is concluded," he said.

"This includes meeting financial reporting, annual reporting, annual general meeting, ASX and ASIC obligations."

The ongoing Murray Goulburn directors will be Lisa Dwyer, Ian Goodin, David Grant, Brock Williams and the chairman.

After the conclusion of the litigation, Murray Goulburn will be liquidated, with any proceeds to be distributed equally to shareholders and unitholders.

Outgoing farmer director Craig Dwyer perhaps summed it up best: "When seven dairy farmers from the Cobram area became the first subscribers to MG, each holding 100 shares on the 9th of January 1950, I am sure they never envisaged this day. The original investment by those visionaries saw MG grow to become one of the leaders in the Australian dairy industry and a cornerstone of dairy communities around the country.

"Now it is time to turn to the future. Globally there is an ongoing and growing demand for dairy products. MG farms and factories will continue to play a vital role in producing world-class milk and dairy products, marketed under recognised brands that the new owners will take over and continue to develop."

Just four years ago Murray Goulburn was making an aggressive play for Australia's fourth-largest milk processor Warrnambool Cheese & Butter, missing out to Saputo.

It later forged ahead with an aggressive growth strategy under former CEO Gary Helou that plunged the group into crisis in 2016 when it retrospectively cut prices to its farmer suppliers.

The Montreal-based company was founded by the Saputo family in 1954, and grown to become one of the top 10 dairy processors in the world.

The $C15.6 billion ($15.86 billion) company is listed on the Toronto Stock Exchange, and it processes over 8 billion litres of milk per year into a variety of cheeses, and other dairy products which are sold in over 40 countries.

Chairman Lino Saputo Jr said the completion of the deal was a significant milestone.

"We are committed to contributing to the sustainability of the Australian dairy industry and look forward to building strong relationships with our suppliers by treating them fairly, with respect and loyalty," he said.

The Foreign Investment Review Board will still need to give it the tick, with the transaction expected close by May.

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