Bega Cheese has ruled itself out of being a possible buyer of its larger and troubled dairy rival, Murray Goulburn, and media reports say the Canadian group, Saputo will be revealed today as the preferred bidder.
Bega was reportedly considering a takeover of Australia’s largest milk processor, along with Saputo (which owns Warnambool Cheese and Butter).
But in a short statement to the ASX on Thursday Bega said it was no longer a potential purchaser, and it has no current plans to raise capital.
Saputo is now said to be the frontrunner with Fonterra, the NZ dairy giant ruled out by competition concerns. Murray Goulburn’s share of the milk market has collapsed to less than 2 billion litres from 3.5 billion a couple of years ago, while Fonterra has benefited with its share up to 2.2 billion litres, making it the largest operator in the sector.
The Australian reported this morning that the Canadian group will emerge as the frontrunner so far as Murray Goulburn is concerned at the MG Trust annual meeting today.
Bega chairman Barry Irvin said in the statement the company continues to maintain a strong balance sheet and believes there are a number of potential opportunities in dairy and food.
His statement came on the eve of the annual meeting later today. It is interesting that Mr Irvine’s statement came two days after Bega’s meeting when presumably it was still in the running. But it would seem Murray Goulburn’s board has thrown its weight behind the Canadian group. Because of its ownership of Warnambool Cheese and Butter, Saputo will also need competition, and foreign investment review board approval.
MG Trust is the corporate vehicle listed on the ASX as a proxy for Murray Goulburn Co-Op which owns the Devondale brand of dairy products.
It reported a $371 million loss in 2016-17, mostly due to restructuring and other costs associated with plant closures in Victoria and Tasmania and the sacking of 360 staff.
Murray Goulburn confirmed in September that it had been approached by a number of suitors interested in either buying some assets or taking over the whole co-operative. That was as a result of a company wide review in the wake of the weak performance.
The results of the review and the reported corporate approaches are likely to be top of the list for today’s annual meeting.
