Canada's Saputo has made a $1.3 billion bid for Murray Goulburn

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Canada’s Saputo Dairy launched a $1.31 billion offer for Murray Goulburn, Australia’s largest milk processor which has been hit by a global downturn in the dairy industry.

The deal values the Australian dairy trust’s units at between $1.10 and $1.15, a premium to the last traded price of $0.83.

Murray Goulburn chairman John Spark says the bid represents the best available outcome for milk suppliers and investors.

Saputo is one of the top 10 dairy processors in the world and active in Australia through its ownership of Warrnambool Cheese & Butter (WCB).

“This transaction will crystallise real value for MG’s equity, whilst rewarding our loyal suppliers through the milk supply commitments,” says Spark.

“MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss.

“Securing a sustainable future for MG’s loyal suppliers is of paramount importance to the Board.

“We are pleased with the strong milk commitments secured as part of Saputo’s offer to reward this loyalty. Saputo has demonstrated itself to be a credible and trusted partner for Australian dairy farmers through its investment in WCB.”

At the end of June, Murray Goulburn reported net debt of $445 million.

The deal is subject to approval from consumer watchdog the ACCC and from the Foreign Investment Review Board.

Murray Goulburn has been hit by volatility in the global dairy market.

In June, Murray Goulburn announced the closure of dairy processing centres at Edith Creek, Tasmania, and Rochester and Kiewa in Victoria with the loss of more than 300 jobs. The company also announced write-downs of $410 million.

In March, Spark, a former managing partner at insolvency experts Ferrier Hodgson, was appointed chairman.

In August, the company announced a full year statutory net loss of $370.8 million on a 10.3% slide in revenue to $2.5 billion. Underlying net profit after tax was $34.7 million, down 14.5%.

The business took in 2.7 billion litres of milk over 2017, almost 22% less than the previous 12 months.

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