Murray Goulburn sold to Canadian dairy giant for $1.31 billion

Murray Goulburn Co-Operative (MG) has agreed to sell its Australian business to Canadian dairy company Saputo for $1.31 billion.

The transaction will include all of MG’s operating assets and liabilities. But despite the fact it has been unanimously recommended by the Murray Goulburn Board of Directors, the deal is still subject to the approval of the Foreign Investment Review Board (FIRB) and the Australian Competition and Consumer Commission (ACCC).

MG produces a range of dairy foods including drinking milk, milk powder, cheese, butter and dairy beverages across a range of brands such as Devondale, Liddells and Murray Goulburn Ingredients.

For the year ended 30 June 2017, MG had revenues of approximately $2.5 billion and earnings before interest, taxes, depreciation, amortisation, milk supply support package forgiveness, rationalisation costs, write-downs and non-recurring costs (adjusted EBITDA) of approximately $79 million.

Due to a turndown in dairy prices in recent years, MG made it clear that it was open to potential offers. The company’s chairman, John Spark, said: “MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss. Securing a sustainable future for MG’s loyal suppliers is of paramount importance to the board. We are pleased with the strong milk commitments secured as part of Saputo’s offer to reward this loyalty.”

As part of the deal, Saputo has agreed to take on MG milk supply commitments for Active MG suppliers totalling $114 million. It would enable a step-up of 40 c/kg of milk solids (MS) to $5.60/kgMS for milk supplied from 1 November, and backpay of 40 c/kgMS from July to October 2017. Active MG suppliers will also benefit from a series of commitments ensuring milk collection and market pricing into the future.

Following its investment in Australia’s biggest milk processor, Warrnambool Cheese & Butter Factory Company, Saputo has demonstrated its support for Australian dairy farmers. The acquisition of MG will add to their portfolio and strengthen their position in the Australian market.

“The btoard believes that the transaction represents the best available outcome for our suppliers and our investors. Saputo is one of the top 10 dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese & Butter (WCB). This transaction will crystallise real value for MG’s equity, whilst rewarding our loyal suppliers through the milk supply commitments,” said Spark.

The transaction is expected to close in early 2018.