The Age, News, 27/10/2017, Photo by Justin McManus. AGM Murray Goulburn dairy at the Exhibtion centre. CEO Ari Mervis.Victorian farmers have blasted Murray Goulburn over the dairy processor’s decision to sell the business to Canadian giant Saputo for $1.31 billion at a sometimes fiery annual general meeting in Melbourne.
Murray Goulburn’s leaders were told during the meeting that their behaviour had been morally bankrupt, that they had capitulated, and they had not done enough to preserve the processor’s milk supply as farmers left and sent their milk elsewhere.
Many farmers hit out after the company told the ASX a couple of hours or so before the meeting started that it had struck a deal to sell to Saputo.
The news shocked some farmers who were not aware negotiations were so advanced. Some expressed concern that Saputo was an international player, rather than an n co-operative or company.
Paul Mundy, a dairy farmer from Cobram East, earned applause when he told the meeting the board had not made enough “of the very hard decisions that were required” to preserve the processor.
Mr Mundy, who unsuccessfully ran for a spot on Murray Goulburn’s board recently, also said: “Why is it that we have effectively capitulated?”
The proposed deal with Saputo -??? which still needs approval on a number of levels and which includes higher payments for Murray Goulburn farmers – comes after a tumultuous period for MG, during which scores of frustrated farmers switched to rival processors after it slashed milk payments.
After the AGM, in an interview with Fairfax Media, Mr Mundy said: “I believe that the board should have taken far greater action, much earlier, to secure our milk flow, milk being our most valuable asset … It appears to us, as suppliers, that there has been a lack of willingness to do so.”
Mr Mundy said Murray Goulburn could have done more to cut costs, questioning why it had rented office space in Melbourne’s Southbank. And he said the company’s “opening price” for this financial year, the amount it would pay farmers for milk, was “an absolute disaster. They should never, ever, ever have come out with $4.70 [per kilogram of milk solids]
Another farmer, Brad Adams, expressed anger at Murray Goulburn’s leadership, while grilling chairman John Spark during the meeting.
“I want to know why there has been this agenda to sell Murray Goulburn,” he said. “I want to know why, when [chief executive] Ari [Mervis] took over we had 2,200 supplier members, we had 2.7 billion litres of milk last financial year, we estimated that we had 2.5 [billion litres] for this year, yet it would appear we have done nothing to retain any of that milk.”
“Our company has now been devalued … Rightly or wrongly we’ve been ripped off. I’ve had a knot in my guts all the way down from Cobram today, and it’s about time you people took some responsibility for the decisions that you make.”
Earlier, Mr Spark defended the unanimous board decision that Murray Goulburn should be sold to Saputo.
“Unfortunately, we as a board, on behalf of the shareholders, have had to make a decision which is unpopular,” he told the meeting. “It is not the best decision that any of us would have wanted to make. But we are doing it with the best intention for all of our shareholders, and ultimately we are putting it to a vote of our shareholders to see if you wish to approve it.”
In Murray Goulburn’s ASX statement, Mr Spark said the Saputo deal represented “the best available outcome” for suppliers and investors. “MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss,” he said.
Another dairy farmer at the meeting, Tim Dwyer, defended Mr Spark, saying “you can’t run a milk company without milk”.
“It’s a very sad situation that we are in here today,” he said, adding that Mr Spark became chairman in “a very difficult set of circumstances”.
Mr Mervis acknowledged that the company’s declining milk supply had hurt it. “The reality is that when you’ve got half the milk that you had two years ago, it’s very very difficult,” he said. “You’ve got the same debt level, you’ve got the same operating costs and you’ve got half the intake … it becomes unsustainable.”
Mr Mervis said he understood that many of Murray Goulburn’s dairy farmers would be disappointed. “I recognise that many of you and your families have been involved with the co-op for generations,” he said.
Mr Mervis said Saputo had been very successful in Canada, Argentina, America and “done themselves proud here in ” after it bought Warrnambool Cheese and Butter in recent years.
In a statement released in Canada, Saputo said: “The acquisition of Murray Goulburn will add to and complement the activities of Saputo’s Dairy Division (). By acquiring a well-established industry player, the company reinforces its commitment to strengthen its presence in the n market. Saputo intends to continue to invest in its n platform and contribute to the ongoing development of its domestic and international business.”
Under the Saputo deal, farmers will receive a 40?? a kilogram of milk solids extra payment for milk supplied this financial year, and “active” suppliers will pocket an additional 40?? a kilogram “loyalty payment” in fiscal 2018 along with commitments for milk collection and market pricing into the future.
The proposed deal remains subject to approval by Murray Goulburn voting shareholders, the n Competition and Consumer Commission and the Foreign Investment Review Board.
Murray Goulburn also recorded strong protest votes at the AGM, of about 13 per cent, for the election of special directors John Spark and Mark Clark.