SYDNEY (Reuters) — Canada’s biggest cheesemaker, Saputo Inc., has agreed to buy debt-ridden Murray Goulburn Co-operative for up to $490 million, becoming Australia’s top milk processor and expanding its access to China.
The deal rescues Murray Goulburn after a disastrous foray into China. Including Murray Goulburn’s debt, the deal value rises to about $1.3 billion.
Hoping to capitalize on the popularity of Australian produce in China, Murray Goulburn went public in 2015, using the funds to expand aggressively in Asia.
But sales were far below expectations, swinging the company to a loss, angering farmer-owners and forcing it to quit the strategy and close three production plants.
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Saputo, whose brands include Dairyland milk and Armstrong cheese, will gain Melbourne-based Murray Goulburn’s production facilities in addition to the Warrnambool Cheese and Butter (WCB) factories and brands it bought in 2014 and 2017 for roughly $500 million.
Growth by acquisition has been Saputo’s major strategy for years, including forays into the United States, as expansion in Canada is limited by a supply management system that discourages trade. Saputo stock jumped four percent in Toronto to C$46.77 Oct. 26.
“Saputo will achieve substantial synergies from merging MG with WCB and its existing global operations,” Morgans analyst Belinda Moore said in a note.
Chief executive officer Lino Saputo Jr. said in a statement the company is investing in Australia for the long term.The Canadian firm will command just over half of Australia’s milk powder market, adding Murray Goulburn’s 42 percent share to WCB’s 9.8 percent, according to data from IBISWorld. Murray Goulburn is the country’s third-biggest producer of milk and cream.
“MG has reached a position where as an independent company, its debt was simply too high,” Murray Goulburn chair John Spark said in a statement pledging the board’s unanimous support for the buyout.
