MURRAY GOULBURN has been all but sold to Canadian processor Saputo for $1.31 billion, with the co-operative seeking a majority of shareholders to approve the sale.
MG suppliers were informed via a supplier letter on the morning of the company’s annual general meeting on October 27.
Many were on their way to the meeting in Melbourne and didn’t get the message from the co-op, but heard the news via the media.
Suppliers attended the meeting in part to hear the board and executive’s plans for the co-op and were surprised to learn that the deal with Saputo had been agreed to, giving them little time to think about the offer or to develop questions for the board.
Many suppliers believed any sale would require 90 per cent approval from shareholders. However, it was revealed that under the constitution the board could sell all assets without any supplier approval.
MG chair John Spark said this would have been “abhorrent” and the board will require a majority approval at an early meeting to be held next year.
The sale requires approval from both the ACCC and Foreign Investment Review Board (FIRB).
Supplier meetings with members of the MG Board, its executive and Saputo CEO Lino Saputo Jnr have begun and Mr Spark said the sale could be completed in the first half of 2018.
MG suppliers will receive a step up of 40c/kg MS for the 2017–18 year for milk suppliers from November 1. On completion of the sale, this money will also be paid for milk supplied from July to October 2017.
An additional 40c/kg will be paid for active Murray Goulburn suppliers.
Saputo has undertaken to collect milk from all active MG suppliers for five years on existing terms and on “reasonable terms” after this.
Mr Spark said for a minimum of five years from next season, Saputo has undertaken to pay active suppliers “the greater of the WCB farmgate milk price and the average of the farmgate milk price of the two largest milk processors”.
MG will retain any liability in relation to the current ACCC proceedings, ASIC investigation and unit holder class action.
For this reason MG will retain part of the proceeds of the sale until the conclusion of these matters. Further cash distributions will be made following such conclusion, or earlier if appropriate.
Any money left over from this amount will then be returned to Saputo. MG will then be “wound up”.
Farmer-director Craig Dwyer painted a blunt picture when addressing the audience.
“Some may see it as far from ideal, but make no mistake, at no point when I first took this job on, did I ever expect to be in the position to be selling MG,” the Cobden farmer told the meeting.
“I signed up to fix it, not sell it, however, reality has prevailed and forced our hand.
“As a consequence, we as a board have looked at every possible option, from standalone through to equity partnership through to a full share sale.
“Believe me when I say, that no stone has been left unturned by the board and management in exhausting all avenues before arriving at this agreement.
“This included tough conversations with Federal Government in which I was involved, having personally met with the Deputy Prime Minister along with Ari (Mervis) in Canberra two weeks ago.
“The outcomes of that conversation were that it is not an industry problem but an MG one, so it was suggested that we needed to find a commercial resolution.
“The option of short-term loans for MG to buy itself some time to trade out of the situation was flagged but it was clearly understood firstly that it would be challenging to secure government agreement, and secondly, any loans would still have to be repaid in full at a point in the future,” Mr Dwyer said.