Murray Goulburn has been all but sold to Canadian processor Saputo for $1.3billion.
MG suppliers were informed via a supplier letter and the media on the morning of the company’s annual general meeting on Friday.
Suppliers attended the co-operative’s AGM in part to hear the board and executives’ plans for the business and were surprised to learn that the deal with Saputo had been agreed to.
Many suppliers believed any sale would require 90 per cent approval from shareholders. But it was revealed that under the constitution the board could sell all assets without any supplier approval.
However, MG chair John Spark said such a move would have been ‘‘abhorrent’’ and the board would 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.
Supplier meetings will begin in November and Mr Spark said the sale could be completed in the first half of 2018.
An amount of money will be retained by MG to deal with current litigation launched against the co-operative. Any money left over from this amount will then be returned to Saputo. MG will then be ‘‘wound up’’.
MG suppliers will receive a step-up of 40¢/kg milk solids for the 2017-18 year for milk supplied from November 1. On completion of the sale, this money will also be paid for milk supplied from July to October 2017.
An additional 40¢/kg will be paid for active Murray Goulburn suppliers.
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.
The board took questions from farmer suppliers and unit holders for more than an hour.
MG chief executive officer Ari Mervis told the meeting that after the decisions to close the factories at Rochester, Edith Creek and Kiewa and after an early delivery of an opening price it became apparent that Murray Goulburn’s cost base and revenue lines were compromised to the extent that it was still unable to pay a competitive farm gate milk price.
He said the strategic review confirmed that new sources of capital were needed to ensure the sustainability of the company.
Mr Mervis said offers included asset sales equity injections and whole business transactions.
Saputo Dairy Australia has entered into a binding agreement to take over milk processor Murray Goulburn for $1.3billion.
The proposal includes:
■A step-up of 40¢/kg milk solids to $5.60/kg MS for the 2017-18 season for milk supplied from November 1 and, on completion of the transaction, for milk supplied from July to October.
■An additional 40¢/kg MS loyalty payment in 2017-18 for active suppliers.
■Murray Goulburn to retain all assets and liabilities associated with the Murray Goulburn Unit Trust and any liability in relation to the current ACCC proceedings, ASIC investigation and unit holder class action (and any similar such actions).
■Active suppliers will be offered a series of commitments from Saputo ensuring milk collection and market pricing for five years from 2018-19.
■The proposal is subject to approval from more than 50 per cent of voting shareholders and other customary conditions including ACCC and FIRB approvals
Suppliers angered by lack of communication
Murray Goulburn suppliers are still digesting the shock news that their board has agreed to accept an offer from Canadian company Saputo.
Some were irritated by the way the news was delivered on the morning of the annual general meeting, with little time to think about the offer or to develop questions for the meeting.
Many were on their way to the meeting in Melbourne on Friday morning and didn’t get the message from their company, but heard the news on the radio.
Cobram farmer Brad Adams said he was shocked when he heard the news of the sale.
‘‘I would have liked some remnants of a co-op left,’’ Mr Adams said.
‘‘To have this done has been a shock. The directors never came to us and asked what we wanted. They should have said, ‘It’s your company, what do you want to see?’.
‘‘I need to read the finer details but they should have received more money for the assets.’’
Murray Goulburn supplier and shareholder Di Bowles has raised her concerns over the potential takeover of the milk processing co-operative by Canadian company Saputo, and said at this stage she would be voting against the takeover.
Mrs Bowles, from Mead (west of Cohuna), said she was firstly disappointed at how the news was delivered.
‘‘I was very unimpressed as I heard it on the way to the AGM. It was very disappointing the way suppliers had it communicated to them,’’ she said.
Mrs Bowles said she was also concerned with how only a 50 per cent vote was needed for the takeover to be successful.
‘‘It’s disappointing that it’s 50 per cent and not 90 per cent. It wouldn’t have passed. At the moment it’s borderline.
‘‘At this stage we will be voting ‘no’.’’
Mrs Bowles said she was looking forward to seeing how Saputo presented itself in the near future.
‘‘It will be interesting to see how they present themselves in upcoming meetings we have with them,’’ she said.
‘‘Sadly it will probably get over the line but hopefully shareholders raise concerns.
‘‘(If successful) it will have implications for the whole dairy industry, not just Murray Goulburn suppliers.’’
Mrs Bowles said she was also annoyed at the fact wet and dry shareholders were going to be paid the same.
‘‘The 75 cent share for wet or dry shareholders is pretty annoying.
‘‘I think that’s unfair when we had been encouraged by the chair and the board to stay because our shares would be worth more as wet shares.’’
Despite all of her concerns, Mrs Bowles said she would not turn away the proposed price step-up.
‘‘It’s really nice, I’m not going to say no to extra money and it will make us on par with others.’’