Economy

Canada's Saputo to buy Aussie dairy firm Murray Goulburn for $488 mln

Murray Goulburn has agreed to the sale of its operating assets and liabilities to Saputo Dairy Australia for $1.31 billion.

"For this reason Murray Goulburn will retain part of the proceeds of the transaction until the conclusion of these matters", it said.

"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 at Murray Goulburn's annual general meeting on Friday.

Morgans senior analyst Belinda Moore said in a research note the deal was "extremely disappointing" for unitholders in the ASX-listed MG Unit Trust.

Saputo says the acquisition of Murray Goulburn will "add to complement" its dairy division's activities.

A statement by Saputo said that the acquistion reinforces its commitment to strengthen its presence in the Australian market; and that the company intends to continue to invest in its Australian platform and contribute to the ongoing development of its domestic and global business.

If approved, Saputo will become one of Australia's largest dairy processors; the company entered the Australian market after buying Warrnambool Cheese and Butter Company three years ago.

"We were not given the opportunity to meet with Murray Goulburn's Board as our proposal required their direct input, and we chose not to participate in the strategic review process run by Deutsche Bank".

MG will step-up the 2018 farmgate milk price by $0.40 per kilogram of milk solids to $5.60/kg MS for milk supplied from November 1, 2017. "This transaction will crystallise real value for MG's equity, whilst rewarding our loyal suppliers through the milk supply commitments", said MG's Chairman John Spark in a statement.

Murray Goulburn's prior forecast payment for the current season at $A5.20 per kilogram of milk solids was below the forecast payouts of rivals, including Fonterra and Saputo's Warrnambool and Bega Cheese. This amount will be paid at, and is subject to, completion of the transaction.

"Farmer shareholders are better off under this offer", Ms Moore said.

The announcement comes on the same day as Murray Goulburn hold their AGM in Melbourne. MG intends to rely on the previously announced deviation from the profit sharing mechanism.

Fonterra confirmed last month that it had made an indicative, non-binding proposal to the board of Murray Goulburn.



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