MG churned up as buyers talk BRIDGET CARTER, SCOTT MURDOCH The...

MG churned up as buyers talk

• BRIDGET CARTER, SCOTT MURDOCH
• The Australian
• 12:00AM August 21, 2017
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Investment bank Deutsche is believed to have engaged with possible buyers of Murray Goulburn on Friday, in what some say is a further sign that the country’s largest milk processor is under pressure.

Parties reported receiving inbound calls from the bank about buying the company ahead of its results announcement tomorrow.

The move has had some wondering whether the company, which owns some of the country’s best-located milk processing centres, is being pushed by its banks into putting itself up for sale, or may be unable to secure the production volume it needs to pay farmers its milk price of $5.20 a kilogram.

But sources close to the company have rejected suggestions that the business faces a fire sale.

Potential buyers include Bega, Lion, Parmalat, Saputo and Lactalis.

Industry heavyweight Fonterra is not thought to be keen, given its oversupply of milk processing plants. It is the greatest beneficiary from Murray Goulburn’s woes as farmers jump ship to the New Zealand co-operative, and would likely face the most competition issues of any bid.

Australia’s big four banks have recently fielded calls from foreign groups and Chinese parties about financing a bid for Murray Goulburn.

Any bid would require 90 per cent support from Murray Goulburn’s farmers under its co-operative structure.

Deutsche was appointed last month to carry out a strategic review of Murray Goulburn.

One possibility is a company break-up.

Parmalat and others are understood to have asked about MG’s willingness to sell various assets.

The supermarket milk business is most likely in Parmalat’s sights.

Murray Goulburn also has 10 processing plants throughout Australia.

Given Murray Goulburn is Australia’s largest milk processor, any sell-off is likely to be closely scrutinised by the government.

Murray Goulburn has a value on the sharemarket of about $135m but an overall value of about three times that.

Sources say it could be some time before Deutsche concludes its strategic review. Its focus remains on Murray Goulburn’s strategy and corporate structure, including the profit-sharing mechanism and capital.

The company listed on the Australian Securities Exchange in 2015 but its shares have crashed as it faces a class action and is now offering a lower milk price than its competitors, causing many of its suppliers to go elsewhere.

More insight into its financial state will be gained when the company delivers its 2017 financial year annual results on August 22.