Directors rejected financially superior offers from Chinese firms for struggling dairy business Murray Goulburn in favour of a $1.3 billion bid from Canada’s Saputo, because they feared the Chinese bids would struggle to gain support from the Turnbull Government, according to a report in The Australian.
Citing its own investigation, the News Corp paper this week revealed at least six bids were received worth more than the $1.31 billion offer from Saputo, which MG accepted in a statement last week.
A $1.75 billion offer from TasAsiaDairy-Shanghai was the most valuable reported offer that was rejected by the 11 director, followed by a $1.6-$1.7 billion offer from private Chinese firm Yili Dairy, which reportedly planned to float the business on the ASX with farmers retaining a 49% share of ownership.
There was also a reported $1.5 billion offer from another Chinese private firm, Inner Mongolian Mengniu to buy all 10 of Murray Goulburn’s processing sites, which committed to spend an additional $300 million – $400 million over the next five years to expand the operation.
While Murray Goulburn has made statements addressing why other offers were rejected, it said last week it felt the $1.31 billion Saputo offer represented best overall value for the co-operative’s farmers and investors, given Saputo had “demonstrated itself to be a credible and trusted partner for Australian dairy farmers through its [2013, $533 million] investment in Warrnambool Cheese & Butter”.
But a source close to the Mengniu, quoted by The Australian, said the Canadian firm was chose because it would be the easiest bid to get past the Foreign Investment Review Board.
“It’s xenophobia, pure and simple,” the person was quoted as saying. “It’s going to be interesting to see how this plays out in the long term.
“China is getting pretty sick of Australia’s attitude towards Chinese companies legitimately investing in its business assets.”
Murray Goulburn boss Ari Mervis, also quoted by The Australian, said each bid had been measured “holistically”.
“The board assesses each proposal thoroughly, holistically and on its merits,” he was quoted as saying. “It wasn’t rushed but certainty of funding and completion was important, as was the timing … to ensure it was completed to allow Murray Goulburn to pay a [more] competitive milk price to its farmers …
“Value was an important criteria but only one of many; it was apparent to all the board the proposal put by Saputo met many of the objectives; they have done a great job since securing WCB and the strength of their balance sheet promises a favourable future.”