Saputo Inc. has sold one of its major production plants in Australia to local rival Bega Cheese for $244 million.
The sale of the Koroit plant in the state of Victoria was a condition set by Australia’s competition regulators in April when it approved Saputo’s $1.3-billion takeover of the Murray Goulburn Co-operative — making the Quebec-based company the largest dairy processor in Australia.
With the Koroit plant in its arsenal, Saputo would have controlled more than two thirds of the country’s dairy processing. This concerned the Australi
an agency responsible for competition and consumer protection, in particular because of the effect it could have on the price offered to local milk producers.
Irene Nattel, the managing director of RBC Capital Markets, said she was pleasantly surprised by the amount Saputo received for Koroit, given that her “conservative” prediction for the sale was $175 million.
“Due to the interest from many industry players (from Australia, New Zealand, the European Union and China), we believe Saputo was able to negotiate a more attractive price for this asset,” Nattel said in an email on Wednesday.
She said she wasn’t surprised Bega Cheese purchased the plant, since it is one of the country’s largest dairy companies.
“This is logical in our opinion, given that a local company could use its existing network in Australia to generate collaborations and improve its ability to pay (local milk producers),” Nattel said.
The Koroit plant currently employs almost 110 employees and generates an annual revenue of $234 million. The transaction is expected to be finalized during the second quarter of the 2019 fiscal year.
Saputo has had a foot in the Australian dairy market since 2014, when it acquired Warrnambool Cheese & Butter.
The company will have its work cut out for it, however, with the acquisition of Murray Goulburn. Having struggled financially for years, the co-operative saw its milk-processing quantity drop by about 30 per cent, to 1.1 billion litres, during the first half of the 2017-18 fiscal year, which ended on Dec. 31, 2017.
Founded in 1954, Saputo also has facilities in Canada, the United States and Argentina. The company employs more than 12,800 people.
Source: Montreal Gazette