MG tight-lipped as sell-off speculation mounts

Dairy players move in on MG, but co-op stays tight-lipped


Agribusiness
The list of potential buyers for at least part the embattled Murray Goulburn dairy co-operative is mounting

The list of potential buyers for at least part the embattled Murray Goulburn dairy co-operative is mounting

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Big co-op, Murray Goulburn, tells the share market it has received “a number of proposals” for asset sales and more

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A frustrated Murray Goulburn co-operative has been forced to hose down frenzied media speculation about a host of possible local and overseas buyers lining up to buy the financially-stretched dairy giant.

MG confirmed to the Australian Securities Exchange (ASX) it has received a number of indicative proposals, but the details are non binding – and confidential.

It said offers have ranged from the sale of specific MG factory and brand assets to a potential whole-of-company sale to a new owner.

The list of potential buyers for at least part the embattled business has been mounting for the past month.

MG notes there is no certainty that any transaction will eventuate. - Murray Goulburn

Although the co-op has a unit trust listed on the ASX, MG’s business remains fully controlled by its farmer shareholders, which means any decision to sell would first require at least 90 per cent support from its milk suppliers.

However, the embattled company is mid-way through a strategic review of its operations and commercial structure which is expected to result in some of its big portfolio of brands and businesses sold off.

Who’s a potential buyer

Some details are expected to be shared with farmers and other shareholders at next month’s annual general meeting where MG’s $371m after-tax loss in 2016-17 and 21pc drop in milk receivals will also be top of mind among those attending.

Heading the list of those speculated to want to buy all, or significant parts, of MG are local dairy rival turned spreads and sauces maker,  Bega Cheese; New Zealand mega co-op, Fonterra; Canada’s Saputo, which owns Warrnambool Cheese and Butter; food business Goodman Fielder, now owned by Asian partners Wilmar and First Pacific; the French-owned global processor, Parmalat and possibly Japanese-owned Lion, which absorbed the Dairy Farmers co-op and National Foods a decade ago.

This week media talk about potential suitors focused on China’s Inner Mongolian dairy outfits, the Mongolia Yili Industry Company, and Fuyan Farming which has ties with Danish dairy co-op Arla Foods.

Arla has also been mooted as a potential investor in its own right as it looks to expand its Asian footprint.  

A company statement to the ASX denied suggestions that any offer had been made to buy its MG Unit Trust shares for about $1.20.

It said MG and its financial advisor, Deutsche Bank, were “engaging with a number of parties to assess their proposals, including valuations”.

Too early to say

“At this point it is too early to make any comment about the valuation or implementation.

“MG notes there is no certainty that any transaction will eventuate.”

MG, is Australia’s biggest dairy business with a milk receival footprint extending from the NSW Mid North Coast to Tasmania.

NZ’s Fonterra was reported to have recruited financial adviser Rothschild to assess its own expansion options, although a bid for the co-op would involve considerable competition complexities given it and MG dominate the milk processing sector in southern Australia.

Overseas bidders for any assets would also have to win approval from Foreign Investment Review Board.

MG is currently in the throes of closing three factories in Victoria and Tasmania.

It is also braced for court action from a class action and the Australian Competition and Consumer Commission, which claims it failed to keep suppliers adequately informed about the prospect of poor global dairy prices leading to a late season cut in its farmgate milk price in 2015.

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