MURRAY Goulburn spurned a proposal from Fonterra to form a super dairy co-operative in favour of a sale of its assets to Canadian rival Saputo.
By: SIMONE SMITH and PETER HEMPHILL
Source: The Weekly Times
Sources have told The Weekly Times Fonterra proposed combining its Australian assets with those of Murray Goulburn to form a super co-operative but the proposal was rejected by MG management as it was deemed to be a non-complying bid.
Fonterra managing director René Dedoncker confirmed his company put forward a proposal which included “retention of Murray Goulburn’s co-operative ethos”.
“Our proposal to the MG board was based on a merger that provided options for Australian farmers to retain ownership and get a strong farmer voice,” Mr Dedoncker said.
“Unfortunately, we were not given the opportunity to progress to due diligence on MG.”
An MG spokesman said: “Of all the proposals received, the board’s unanimous view was that the Saputo transaction represents the best outcome for our suppliers and our investors.”
One source said MG made it clear to potential bidders — believed to have numbered about 20 — from the start of the sale process the co-operative was interested in deals only for the whole of MG’s business, not for the purchase of individual assets.
The source, who did not wish to be named, said the whole process was rushed in order to make an announcement to shareholders attending MG’s annual general meeting on Friday.
The Weekly Times understands an offer from China’s Mengniu Dairy included a combination of shareholders retaining equity as well as cash.
The majority owner of South Gippsland dairy processor Burra Foods, Inner Mongolia Fuyuan Farming, is part of the Mengniu Dairy group of companies.
Many bidders are understood to be frustrated with the bid process for MG, saying they were given “literally no data”.
A number of industry sources also said Chinese bidders were effectively ruled out because the Federal Government would find it unpalatable to sell to a buyer from China.
The Weekly Times understands the lack of information has prevented counter offers for the co-operative, as it would be deemed too risky without appropriate time and information to complete due diligence.
Fonterra did not answer questions on whether it was likely to lodge a counter offer to the Saputo deal.
Sources have told The Weekly Times it was unlikely counter offers would be lodged before the Saputo deal was put to shareholders early next year.
MG announced on Friday morning it was selling its operating assets and liabilities to Saputo for $1.31 billion.
The deal included $114 million to MG’s current milk suppliers for a step-up payment of 40c a kilogram milk solids from today and an additional 40c/kgMS back payment to the start of the season once the transaction was completed.
Dairy farmers and unit holders attending Friday’s annual general meeting were shocked to learn MG had sold the co-operative that morning.
Some questioned whether it was the best deal and asked if the door would be kept open to future bids.
The Saputo deal would be put to voting members of MG early in the new year, with the expectation it would be completed by the end of June.
Murray Goulburn chairman John Spark said the company did not have to put the deal to a ballot because it involved an asset sale, but did so because the board found it “abhorrent” not to give members a say in the process.
But the ballot would need to be carried only by a simple majority.
United Dairyfarmers of Victoria president Adam Jenkins said any deal should show economic, moral and ethical values.
“We did see Saputo hold its (WCB) milk price during the milk price drop 18 months ago. There’s moral value in that,” Mr Jenkins said.