Distressed Australian dairy processor Murray Goulburn has struck a deal to sell all of its operating assets to the Canadian dairy player Saputo for $1.3 billion.
The deal, which includes higher payments for Murray Goulburn suppliers, comes after a tumultuous period for the company, during which scores of frustrated farmers switched to rival processors after it slashed milk payments.
It was announced just hours before Murray Goulburn’s annual general meeting in Melbourne, where farmers vented their anger over the sale, saying the company had “capitulated”.
Murray Goulburn’s chairman, John Spark, said the deal represented “the best available outcome” for suppliers and investors and had the unanimous backing of the board. It was necessary as debt was “simply too high” and milk supplies were falling.
However, dairy farmers packed into the AGM said their organisation had been poorly run and communicated badly with suppliers.
“Why is it that we have effectively capitulated?” he said.
Murray Goulburn chief executive Ari Mervis said he understood many dairy farmers would be disappointed.
“I would like to acknowledge the dissatisfaction for many of you in hearing the background to today’s news, and the situation that MG is in,” Mr Mervis said.
“I recognise that many of you and your families have been involved with the co-op for generations.”
Another dairy farmer, Tim Dwyer, defended Mr Spark, saying “you can’t run a milk company without milk”.
“It’s a very sad situation that we are in here today,” he said, adding that Mr Spark became chairman in “a very difficult set of circumstances”.
Under the Saputo deal, farmers will receive a 40¢ a kilogram of milk solids extra payment for milk supplied this financial year, and “active” suppliers will pocket an additional 40¢ a kilogram “loyalty payment” in fiscal 2018 along with commitments for milk collection and market pricing into the future.
Saputo is a major Canadian dairy player that bought Warrnambool Cheese and Butter in recent years. Its latest deal remains subject to approval by MG voting shareholders, the Australian Competition and Consumer Commission and the Foreign Investment Review Board.
Australian dairy producer Bega Cheese announced on Thursday that it had pulled out of the race for Murray Goulburn.
Morgans senior analyst Belinda Moore said farmer-shareholders were better off under the offer but it was “extremely disappointing” for unitholders in the ASX-listed MG Unit Trust, who would largely receive less than they originally paid for their stake in the co-op.
“However, we also recognise that MG’s bargaining position was low given its financial status and severe market share loss, which would likely have only got worse given it is not in a position to pay a competitive farmgate milk price,” she wrote in a note to clients.