Oz dairy in consolidation mode
The Australian dairy industry is heading for more consolidation as milk supply shrinks, according to dairy analyst Steve Spencer.
The deal is expected to be ratified by MG shareholders at a meeting later today.
If approved, Saputo will become one of Australia’s largest dairy processors; the company entered the Australian market after buying Warrnambool Cheese and Butter Company three years ago.
Fonterra, which was also vying for Murray Goulburn, misses out on another key Australian asset; it lost a bid for National Foods 10 years ago.
Saputo’s deal with MG includes paying an extra A40c/kgMS for milk this season; MG suppliers will get A$5.60/kgMS from November 1.
Murray Goulburn chairman John Spark says the board believes that the transaction “represents the best available outcome for our suppliers and our investors”.
“Saputo is one of the top ten 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.”
Spark says 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.
Saputo has demonstrated itself to be a credible and trusted partner for Australian dairy farmers through its investment in WCB. The transaction has the unanimous support of the MG board.”
