Australian Regulator Flags Concern Over Saputo’s $1 Billion Takeover
Australia’s competition regulator has raised concerns about a planned $1.0 billion takeover of Murray Goulburn Co-operative by Canada’s Saputo Inc, threatening a deal Australia’s largest dairy processor says is key to its survival.
Canada’s biggest cheesemaker Saputo last year agreed to pay up to A$490 million for debt-ridden Murray Goulburn following a failed expansion in China, in a deal valued at about A$1.3 billion ($1.0 billion) including debt.
The Australian Competition and Consumer Commission (ACCC) said on Thursday the takeover could lead some dairy farmers in the state of Victoria, the country’s largest milk producing region, with little choice when selling their milk.
“We are concerned this transaction would ultimately lead to lower prices being paid to dairy farmers in the region,” said Rod Sims, chairman of the ACCC, in a statement.
Analysts said it was not yet clear whether the ACCC’s objection, which related to a single dairy plant, the Koroit plant in western Victoria, would scupper the deal.
“It is one plant out of eight owned by Murray Goulburn so you would expect they will amend the deal, but it’s an important region for Australian milk production and no doubt attractive to Saputo,” said Belinda Moore, equity analyst at RBS Morgans.
The region in western Victoria accounts for about a fifth of Australia’s national milk production, according to data from industry body, Dairy Australia.
Murray Goulburn shares fell more than 5 percent, but partly recovered to be down 1.8 percent at A$0.83, well below their A$2.10 listing price in 2015.
Saputo, which entered Australia three years ago by acquiring a local producer, said it would await the ACCC’s final decision, due by March 29.
The Canadian firm would process nearly half of Australia’s milk output under the current deal, Dairy Australia data showed.
Murray Goulburn was left reeling in 2016 after aggressive plans to sell high-margin products such as infant formula in China led it to overpay for source milk, while sales fell far below expectations.
The processor’s financial difficulties forced it to cut the price it pays farmers for milk, leading many to sell elsewhere. Milk intake fell 30 percent in the half-year to end-December, the company said last month.
“Further losses of milk flow may trigger an impairment to Murray Goulburn’s assets that could breach banking covenants and result in potential withdrawal of creditors’ support,” it warned in its half-year results.
Other suitors for Murray Goulburn had included Australia’s Bega Cheese Ltd, Italy’s Parmalat and China’s Inner Mongolia Yili Industrial Group Co Ltd.
Thu, 03/01/2018 – 10:41
Source: Dairy Herd