Bidders line up as dairy co-op Murray Goulburn continues sale process

Among those said to be in the running to buy the Australian giant are co-ops Arla and Fonterra

Competition is hotting up in the race to buy Australian dairy co-op Murray Goulburn, including rival New Zealand co-op Fonterra and Denmark-based international co-op Arla.

There is also an array of bidders from the non-co-op sector, including Australian companies Bega Cheese and Lion.

Also in the running are Italy’s Parmalat, Canada’s Saputo, New Zealand’s A2 Milk and France’s Lactalis. Hong Kong/Singapore firm Goodman Fielder, which has operations in New South Wales, is also bidding.

Fonterra is reported to have engaged financial adviser Rothschild for the bid, although The Australian reports that it is “not thought to be keen, given its oversupply of milk processing plants”.

It adds that Fonterra has attracted farmers from Murray Goulburn as the latter’s troubles continued, and a bid would face competition issues. Australia’s competition authorities will take a keen interest in the bidding process, with Murray Goulburn the country’s biggest dairy processor.

Overseas bidders like Arla, meanwhile, would have to win approval from Foreign Investment Review Board.

Arla’s interest is said to stem from a desire for a foothold in the Asian market, with Australia offering a freight transport base.

There is also speculation that Murray Goulburn could be broken up, with some bidders such as Parmalat expressing interest in specific parts of the business.

The sale follows a troubled period for the Australian co-op, which has called in Deutsche Bank for a strategic review.

It listed itself on the Australian Securities Exchange in 2015 but its fortunes dipped forcing it to cut prices to its milk suppliers. This led many suppliers to go elsewhere and has reduced this year’s milk intake by 21% compared to 2016.

The difficulties have seen Murray Goulburn close three factories at Rochester, Kiewa and in Tasmania, drawing condemnation from union leaders. The co-op is now also defending a court case brought by Australian Competition and Consumer Commission (ACCC), which claims it failed to keep suppliers adequately informed about the cut in prices.

“The farmers relied on Murray Goulburn’s representations and were not expecting a substantial reduction in the farmgate milk price, particularly so close to the end of the season when it was not possible for them to practically readjust their expenditure,” said ACCC chairman Rod Sims.

Former managing director Gary Helou and former chief financial officer Brad Hingle have denied the farmgate milk price set for 2015-16 was false or misleading.

They also deny ACCC allegations that they were knowingly concerned or were a party to breaches of Australian consumer law.

Some commentators warn the legal action could affect the sale process, with Australia’s Weekly Times suggesting responsibility for defending the case transferring to a new owner.

A Murray Goulburn spokesperson said: “MG filed its Defence to the ACCC’s Statement of Claim with the Federal Court on 5 September 2017. We will be making no further statement at this stage as these matters are before the court.”

With regard to the sale process, a spokesperson said: “We intend to provide a further update on the progress of these important initiatives at our Annual General Meeting.”

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