Will farmers get a sweetner in MG deal?

01 Nov, 2017 04:00 AM
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With the fate of embattled Murray Goulburn set to become clearer on Friday it will be interesting to see what, if any, sweeteners are on offer for those at the coalface of the milk industry.

A successful tilt by Canada's Saputo, or another party, will be closely scrutinised by farmers who have borne the brunt of a litany of poor decisions by management and lower milk prices at the nation's biggest dairy processor.

Despite increasing the price paid on milk delivered to $5.20 per kilogram of milk solids in June, Murray Goulburn's price still sits below that of rivals Fonterra and Bega Cheese. The differential has contributed to the departure of farmers from Murray Goulburn.

That makes wooing farmers back and retaining those on the books crucial to the company's future.

It's understood Bega's Murray Goulburn bid included a fighting fund or milk pool of as much as $300 million, which would have been used to lure back farmers and up the price paid to those who had been loyal throughout the company's travails.

That comes after Murray Goulburn outlined that it expects to collect 2 billion litres of milk in 2018, which represents a fall of 43 per cent in just two years.

Bega was dropped from the bidding contest on Thursday and appears to have been outmuscled on its headline bid price.

Even so, complexities around the Murray Goulburn unit trust structure and the overlay of the Foreign Investment Review Board, meant the prices being put forward by some bidders were not the overriding consideration.

One of the Chinese suitors was said to have lobbed an offer of more than $1.5 billion and didn't make the cut.

The situation will reach a crescendo on Friday at Murray Goulburn's annual general meeting.

AFR

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