Milk suppliers cautious after Murray Goulburn’s sellout stunner

The shock announcement on the morning of its annual meeting that Murray Goulburn will be sold to Canadian dairy company Saputo has left suppliers stunned and concerned about their future.

The $1.3 billion sale needs majority shareholder approval which would see the once mighty dairy co-op disappear completely.

Announcing the sale, Murray Goulburn said its suppliers would be paid a 40 cents a kilogram milk solids (kg/MS) step up to $5.60/kgMS for the FY18 farmgate milk price from November 1, and backpay, on completion of the transaction, for milk supplied from July to October 2017.

The company will also pay a further 40c/kgMS loyalty payment in 2017-18 for its active suppliers.

It is what happens to farmgate prices after that which has loyal Murray Goulburn suppliers concerned.

“The projection of what’s ahead is purely a 12-month perspective,” one Alpine Valleys supplier, who did not want to be named, told The Border Mail.

“I’m very unsure about what it means in the long term … I’m very, very cautious as a supplier having gone through the previous floating experience. The details are vital and we haven’t seen the details yet.”

Murray Goulburn chief executive Ari Mervis accepted there would be mixed reaction.

“While perhaps not a universally popular outcome, it is certainly one that, given the current circumstances, is in the best interest of all MG stakeholders,” he said.

A cloud hangs over the future of Murray Goulburn’s yoghurt joint venture with Danone in the Kiewa Valley.

The sale would see Saputo take control of all operating assets and operating liabilities of Murray Goulburn.

MG has not responded to The Border Mail’s questions about what that means for the Tangambalanga operation.

Devastated: Kergunyah's Ann Jarvis expressed concern that "Saputo could just wipe us out with the stroke of a pen" after Friday's announcement.

Devastated: Kergunyah's Ann Jarvis expressed concern that "Saputo could just wipe us out with the stroke of a pen" after Friday's announcement.

Why weren’t we consulted?

Kergunyah’s Ann Jarvis said she was devastated, “not because I am surprised, my suspicion was that this would happen, somehow, because I believe we had come too far down the path to go back.”

She said she received the news on the bus, on the way down to Murray Goulburn’s annual general meeting.

“The least they could have done was tell us, after this meeting,” Ms Jarvis said.

“Everything that has happened to our company, in the last two years, is a direct result of us having part listed on the ASX and the folly of certain people at the top.” She said she accepted Australian Securities Exchange rules were different, from running a co-op.

“By the same token, it has been devastating for most of the people in the room, we feel totally helpless, and betrayed.”

She said her concern was that Kergunyah did not have the same access to processors, as did other areas of Victoria.

“In five years time, which is supposedly the agreement that has been taken up by Saputo, if it’s passed by the Australian Competition and Consumer Commission, in five years time, where to then? Saputo could just wipe us out with the stroke of a pen.”

Northern Victoria dairy farmer Paul Mundy also criticised the proposed deal. "Why is it that we have effectively capitulated?" he said.

GOOD DEAL: Ari Mervis, Murray Goulburn chief executive, said the Saputo deal would offer a very good solid commercial outcome that suppliers and unit holders would benefit from.

GOOD DEAL: Ari Mervis, Murray Goulburn chief executive, said the Saputo deal would offer a very good solid commercial outcome that suppliers and unit holders would benefit from.

It’s the best we could do: Mervis

Murray Goulburn chief executive Ari Mervis has acknowledged supplier shock and anger over Murray Goulburn’s decision to sell to Canadia’s Saputo but said it was the best deal possible.

He said the average farm, of about 300 cows, would end up receiving about $100,000 more in its milk price, than they would have otherwise received, “had they carried on with our uncompetitive milk price”.

Under the deal, farmers will receive a 40c kg/MS (kilogram/milk solids) extra for milk supplied this financial year.

Active suppliers would be paid an additional 40c kg/MS "loyalty payment" next financial year, along with commitments for milk collection and market pricing for five years.

“If the deal goes through there is a ... very good solid commercial outcome,” Mr Mervis said after the annual general meeting.​