Canadian Lino Saputo is set to become Australia’s biggest milk processor today after paying around $1.3bn for Murray Goulburn’s assets.
The deal was unveiled at Murray Goulburn’s annual meeting this morning along with plans to pay down debt and collapse the listed vehicle.
Unit holders (MGC) will be paid $1.10 a share, below the $2.10 float price but above yesterday’s closing price of 83 cents.
Shareholders will get 75 cents a share in the first half of next year with the remaining $192 million or 35 cents a share payable after the conclusion of pending legal actions.
Meanwhile, farmers will receive a farmgate price of at least $5.60 a kilogram of milk solids.
Saputo is buying the MG assets including its brands because that is a simpler structure given the litany of law suits around the co-op.
The ACCC has an unconscionable conduct case under foot and unit holders also have a class action which also goes before the court today.
The Federal Court is due to decide whether the existing statement of claim is allowable.
Saputo entered the Australia dairy market three years ago buying Warnambool Cheese & Butter for $530m. It now processes one billion litres of milk and will pick up an additional 1.9 billion through its MG acquisition plus the Devondale brand.
Fonterra is the next largest with 2.5 billion litres under production.
At its peak two years ago, MG handled 3.6 billion litres.
The deal will be subject to ACCC clearance, FIRB and shareholder approval.
The transaction would mean Murray Goulburn would benefit from commitments from Saputo ensuring milk collection and future market pricing, the company said in a statement to shareholders.
Chairman John Spark said the board believes the deal is in the best interest of shareholders, who will vote on the transaction at an upcoming shareholders meeting.
“The transaction has the unanimous support of the MG Board,” he 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.
The transaction is expected to be completed in the first half of next year.
Saputo is being advised by Moelis.
By John Durie
Source: The Australian
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