The Canadian company that acquired Victorian processor WCB three years ago has entered into a binding agreement to buy Australia's largest dairy processor Murray Goulburn (MG) for $1.3 billion.
Saputo Dairy Australia will buy all of the embattled company's operating assets and operating liabilities, MG announced, if agreed to by a majority vote of shareholders at an extraordinary general meeting to be held early next year, and by regulators.
"This transaction provides certainty for the future of our suppliers and a far better outcome than anything we can achieve by remaining a stand-alone entity. Importantly it will deliver a valuable package of benefits for both suppliers shareholders and unitholders," MG chairman John Spark said at the company's annual general meeting.
"We are pleased to have secured an agreement with Saputo, one of the top 10 dairy processors in the world, the largest cheese manufacturer and leading fluid milk and cream processor in Canada. We believe they have demonstrated themselves as a credible and trusted partner for Australian dairy farmers through their investment in Warrnambool Cheese & Butter. Most importantly, this transaction will crystalise real value for MG’s equity, while rewarding our loyal suppliers in the form of additional milk payments."
The move puts an end to the hopes of a number of companies - including China’s biggest dairy company, Inner Mongolia Yili Industrial Group, Fonterra and Bega Cheese - that threw their hats in the ring in recent weeks for the company that is best known for its Devondale dairy product range.
In early 2014, Saputo and Murray Goulburn went head to head in a takeover battle for Victorian dairy processor Warrnambool Cheese and Butter.
The latest transaction includes MG milk supply commitments for active MG suppliers totalling approximately $114 million.
Out of the deal, MGs milk suppliers will see a step up of $0.40 per kilogram milk solids (kgMS) to $5.60 per kgMS for the FY18 FMP for milk supplied from 1 November 2017 and, on completion of the transaction, for milk supplied from July to October 2017.
The deal will also include an additional $0.40 per kgMS loyalty payment in FY18 for active MG suppliers, who will also benefit from a series of commitments from Saputo ensuring milk collection and market pricing into the future.
MGs unit holders will see an estimated net value per share/unit of $1.10 to 1.15 after working capital adjustment and other costs, representing a 76– 84 per cent premium to the undisturbed unit price.
MG said that in the first half of calendar 2018, shortly after the expected completion of the deal, an estimated initial distribution of around $0.75 per share/unit will be paid.
MG will, however, retain all assets and liabilities associated with the MG Unit Trust and any liability in relation to the current ACCC proceedings, ASIC investigation and unit holder class action, and any similar actions.
It is for this reason, MG said, that it will retain part of the proceeds of the transaction until the conclusion of these matters.
