Saputo Agrees to Buy Murray Goulburn in A$1.31 Billion Deal

(Bloomberg) -- Canadian cheesemaker Saputo Inc. agreed to buy Australia’s biggest dairy processor, Murray Goulburn Co-operative Co., in a A$1.31 billion ($1 billion) deal.

Saputo will acquire all of the farmer-owned firm’s operating assets and liabilities in the transaction, which includes about A$114 million of milk supply commitments for active suppliers, according to a Murray Goulburn statement Friday. Units in Murray Goulburn’s listed entity soared as much as 14 percent to 95 Australian cents a piece.

The Australian cooperative has under-performed global peers after it cut the price it pays dairy farmers and milk production fell, and reported a A$371 million net loss in the financial year that ended June. The company and adviser Deutsche Bank AG had received several unsolicited indicative proposals earlier this year after announcing a strategic review.

Read more: For a breakdown of the deal

Canada’s largest dairy processor beat suitors that were said to include Inner Mongolia Yili Industrial Group Co., Kirin Holdings Co.’s Lion Pty unit and China Mengniu Dairy Co. Australian producer Bega Cheese Ltd. said Thursday it was no longer a potential buyer.

Founded by Lino Saputo, the Montreal-based company is among the world’s largest cheese and dairy processors, running dozens of plants from the U.S. to Australia with annual sales of more than $8 billion. Saputo, now one of Canada’s richest men, was succeeded as chief executive officer in 2004 by his son Lino Jr.

Saputo uses facilities in Argentina and Australia, where it spent $40 million earlier this year to boost capacity, to ship to emerging markets that can’t meet their rising domestic dairy consumption. The U.S. serves as a secondary exports base. The company has made more than 25 acquisitions worth almost $5 billion since going public in 1997. Saputo plans to continue to invest in Australia, it said in a statement.

Murray Goulburn Chairman John Spark said the cooperative’s “debt was simply too high given the significant milk loss” and that “securing a sustainable future” for suppliers was of paramount importance to the board.

The cooperative tapped equity markets in 2015, selling trust units for A$2.10 apiece. The Saputo transaction is worth between A$1.10 and A$1.15 for each cooperative share and listed unit, after costs, according to the statement.

The deal is subject to regulatory and shareholder approval. Murray Goulburn will retain all the assets and liabilities associated with MG Unit Trust, ongoing proceedings by the competition and securities regulators and a class action by unit holders.

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