Saputo moves to carve up Murray Goulburn assets

Just a week after its $1.3 billion takeover of the beleaguered processor formally concluded, Saputo has begun the sale process for Murray Goulburn’s Koroit plant in western Victoria.

Street Talk understands Saputo’s advisers Moelis is running a two-stage process, inviting offers for the asset before providing a dataroom to a shortlist of bidders.

But it needs to do a quick sale. Saputo was forced to put the plant on the chopping block by the Australian Competition and Consumer Commission, which was worried about its growing market power in the region.

The timeline the ACCC has imposed on the sale has not been made public but the transaction is expected to be done within three to six months. The facility could fetch between $200 million and $250 million, sources said.

Bidders include Bega Cheese, which missed out buying Murray Goulburn to Saputo. Parmalat, Burra and Lion are also in the mix, although the latter may be more gun shy given it is in the midst of a turnaround of its dairy and drinks business after hefty write-downs in the past few years.

Fonterra is also thought to be a less likely suitor given it may encounter similar concerns the ACCC held for Saputo – too much market concentration in south-west Victoria. Saputo owns nearby Warrnambool Cheese & Butter.

That doesn’t necessarily mean smooth sailing for either Bega or Parmalat. Outliers including a2 Milk and Bellamy’s have also been thrown up as possibilities given soaring demand for their branded infant formula products.

The Koriot plant is one of Murray Goulburn’s top three processing assets, processing around 300 million litres of milk. But it has capacity to process between 800 million litres and 1 billion litres, depending on the mix between commodity and value-add products. It has infant formula capacity for 45,000 tonnes.

According to UBS, MG has invested $260 million to $300 million in the asset. The facility has supply agreements with Mead Johnson Nutrition and Kalbe Nutritionals from Indonesia.

Under Saputo’s agreement with the ACCC, the regulator will have to sign off on any potential new owner for Koroit. Saputo has to guarantee milk supply to the new owner for an undisclosed timeframe while allowing farmers locked in to contracts with Murray Goulburn to transfer milk supply to the new owner if they want to.

By: Sarah Thompson Anthony Macdonald Julie-anne Sprague

Source: Financial Review

Link: http://www.afr.com/street-talk/saputo-moves-to-carve-up-murray-goulburn-assets-20180507-h0zqq2

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