Saputo Dairy Australia are set to takeover milk processor Murray Goulburn from the middle of next year after the two companies settled on a binding agreement.
Murray Goulburn announced the proposal this morning with the company that also owns Warrnambool Cheese and Butter.
The proposal will see Saputo acquire all of the operating assets and operating liabilities of Murray Goulburn for approximately $1.3 billion.
"MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss," Murray Goulburn chairman John Spark said.
"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," he said.
For the transaction to go through, approval from voting shareholders, approval from the ACCC and FIRB and completion of other customary conditions are needed.
Active MG suppliers will also benefit from a series of commitments from Saputo ensuring milk collection and market pricing into the future.
These include; a step up of 40 cents per kilogram of milk solids (kgMS) to $5.60 per kgMS for the FY18 for milk supplied from November 1 and, on completion of the transaction, for milk supplied from July to October 2017.
This is in addition to a further 40 cents per kgMS as a loyalty payment in FY18 for active suppliers.
A notice of meeting and explanatory memorandum is expected to be released in early 2018, with the takeover expected to be finalised in the first half of 2018.
The announcement comes on the same day as Murray Goulburn hold their AGM in Melbourne.