Canadian dairy player Saputo Inc has been able to win over Bega Cheese and Fonterra as the Victorian-based dairy co-operative Murray Goulburn struck a deal with Saputo (that bought Warrnambool Cheese in 2014) for selling its operating assets and liabilities for $1.3 billion. The troubled Australian dairy processor, who was facing challenges considering the high debt and loss of milk supplies, held its Annual General Meeting and shed light on the above move. An exodus of suppliers has hit Murray Goulburn as the group started slashing the prices being paid for milk during 2017.

The transaction is said to result in an increase in the price that Murray pays to the dairy farmers for milk. Particularly, from November 1, 2017, the price being paid to dairy farmers is said to rise by 40c to $5.60 for each kilogram of milk solids for milk supplied. The same might also be applied for milk supplied since July 2017, as the transaction is completed. An initial distribution of 75 cents a share, or listed unit, is expected to be paid to shareholders post the completion of the sale in the first half of next year.

The board now believes that the transaction represents the best available outcome for suppliers and investors while the deal is subject to approval from Foreign Investment Review Board, the Australian Competition and Consumer Commission, and MG voting shareholders. Further, Saputo, which is one of the top 10 dairy processors in the world, is expected to help generate real value for MG’s equity, whilst rewarding loyal suppliers through the milk supply commitments.

Nonetheless, this has generated a wave of shock in the industry given the failure of big milk companies to deliver on value.

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