Its share price is finally rising, but Murray Goulburn’s sale to overseas buyers is “an extremely disappointing outcome for the co-operative’s sharemarket listed trust and the payout is not worth waiting for says agribusiness analyst, Belinda Moore.
Stockbroking firm, Morgans, is not waiting for the $1.3 billion deal with Canadian dairy powerhouse, Saputo, to go through and receive regulatory approval next year.
Ms Moore has advised MG’s listed stock holders to sell today.
“There’s no reason to be here,” she said.
Morgans recommended the trust’s shareholders, who own about 25pc of the capital value of the company – but have no voting rights on any management decisions – should not wait for a potential full $1.10 a share return on their investment.
It is disappointing shareholders and unitholders are receiving in most cases materially less than what they originally paid for their shares/units
An estimated initial distribution of about 75 cents a share was expected to be paid by MG in the first half of next year after the sale goes through.
But Ms Moore noted unitholders may receive anywhere from nothing to a further 40c/share in two years’ time, when other legal claims are finalised.
“As we expected, farmer shareholders are better off under this offer,” Ms Moore said.
“It is disappointing that (farmer) shareholders and unitholders are receiving in most cases materially less than what they originally paid for their shares/units.
“However, we also recognise MG's bargaining position was low given it financial status and severe market share loss which would likely have only got worse given it is not in a position to pay a competitive farmgate milk price.”
Share price rebounds
MG’s share price was lingering around the 83c range this week, but jumped about eight per cent to 89c in early trading after the Saputo acquisition announcement on Friday.
When it originally listed, the MGC trust shares fetched about $2.24, rising to peak at $2.70 six months later in December 2015.
MG will retain all the assets and liabilities associated with the MG Unit Trust.
Liabilities include the current Australian Competition and Consumer Commission’s legal proceedings following MG’s industry-shattering farmgate milk price cuts last year, an Australian Securities and Investment Commission investigation and a unitholder class action.
MG as an entity will be wound up after these actions are concluded and it will not be operating any other business in the meantime, assuming the sale to Saputo goes through as planned.
At the conclusion of the various legal actions in a year or more, MG intends to distribute the balance of the transaction proceeds equally to unitholders and shareholders.
“While a higher offer can't be ruled out, we note that MG has undertaken an extensive process and it appears that Saputo's offer is the highest given the board's recommendation of the offer,” she said.
“Saputo will achieve substantial synergies from merging MG with WCB and its existing global operations.”