Canadian dairy giants, Saputo, have offered a $1.3billion dollar fee, to complete the purchase of Murray Goulburn, as reported by abc.net.au.
The deal is all but agreed, though it still needs approval by both shareholders and regulators before it is completed. The news was announced at Murray Goulburn’s annual General Meeting in Melbourne over the weekend, though the deal needs a 90% vote in favour of the deal from farmer-shareholders.
The deal has already received the full backing of the board, though the Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) also need to approve the deal.
Suppliers had expected the announcement of plans to sell upon their arrival at the meeting, with the company having undergone a tough few years with fluctuating milk prices and in-company controversies and scandals. Many farmers had left to seek better prices from MG rivals, and farmers arrived with the hope of hearing how this problem would be rectified.
John Spark, MG chairman, said the board believe the deal was the best outcome for both suppliers and investors. He said the deal was important as MG’s debt was at a point where it was too high.
"Saputo is one of the top 10 dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese & Butter...This transaction will crystallise real value for MG's equity, whilst rewarding our loyal suppliers through the milk supply commitments.” he said.
"MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss." he added.
Though the general feeling towards the deal has been good, it has been met with resistance from some farmers.
"I don't like the idea of a sale," said one dairy farmer
"I'd like to see the Australian dairy industry go ahead with MG a part of it.", he added.
Recent Milk Price cuts:
The processor caused a stir in the industry last year, when they abruptly cut farmer prices. The company was seen as the go-to area for a guide on prices, and the news saw other processors follow suit by also cutting farmer prices. The blame was laid on the unfavourable exchange rates, tied with lower than estimated sales of Milk powders in China.
This led to many farmers owing Murray Goulburn and other processors thousands of dollars, leading to the Government offering concessional loans. Senate inquiries, political roundtables and class actions are all due to take place against MG this coming year.
"I believe the company has done nowhere near enough of the hard yards to save our co-op," he said one supplier before the AGM.
"It's deplorable and disgraceful the way in which this is panning out.", he said.
The Canadian processor are not the first to show an interest in purchasing MG, with Fonterra of New Zealand having previously bid, while Bega Cheese also showed an interest, but dropped out this week.
One Former supplier to the company, Stephen Dwyer, ended his 44year journey with the company as he felt it changed once MG joined the share market.
"I believe once they joined the share market, that's when things changed," he said.
"As farmers we were secondary to the share market and for me it wasn't the co-operative it used to be." he added.
Prices Slashed after ASX listing:
At the co-ops AGM in 2015, former chairman Philip Tracey was celebrating a successful partial listing on the stock exchange This helped raise over $500 million for the company’s investors.
"the culmination of a two-year journey to give MG the strong and stable balance sheet it needs to, to pursue growth and deliver sustainably higher farmgate returns in the years ahead". He said at the time.
Though not long after in April 2016, MG slashed farmgate milk prices and then demanded that farmers pay back the difference. This resulted in the huge crisis in the dairy industry.
This year saw over 360 staff lose their jobs, as three of the company’s processing facilities were sold. Over 60 milk truck drivers also lost their jobs as recently as a few weeks ago. When the company was first listed on the ASX, ith was estimated to be worth half a billion dollars. That value has since nosedived to $159 million, with shares going down as far as 60 cents this year.