AFTER a year of consultation with its dairy farmer suppliers Murray Goulburn (MG) Co-operative has called an extraordinary general meeting (EGM) to vote on a proposed new $500 million capital structure to allow outside investors to help fund the big co-op.
The May 8 meeting in Melbourne will include details of a special investor category for “Friends of MG” – existing and former suppliers, MG employees and residents in dairy regions who will be invited to invest at the proposed unit trust’s initial public offer (IPO) price on the stock market.
MG buys 37 per cent of Australia’s farm milk production in Victoria, Tasmania and NSW and last year generated more than $2.9 billion in processed milk product sales.
“At stake is our ambition for MG to be a world-class dairy foods business for generations to come,” said chairman Philip Tracy.
He assured farmers the recommended capital structure, which would create a listed equity trust, was designed to ensure suppliers retained full control of MG while “providing the strong foundations and stable capital base required to pursue growth opportunities and deliver a sustainable increase in the farmgate milk price (FMP)”.
Mr Tracy said the capital structure would aim to raise about $500m to support MG’s growth and value creation strategy to deliver sustainably higher FMP and future earnings through investment in value-add products, improving operational efficiencies and innovation.
Under the proposal to shareholders, most of the capital will be raised through an IPO of a unit trust on the Australian Securities Exchange (ASX).
Unit holders would have economic exposure to MG’s business but no voting rights in relation to the company or its operations.
The “friends” category unit holders will be provided with priority stakeholder allocations.
Capital will also be raised through offers of shares to MG’s 2500 suppliers.
Central to the structure plan is a profit-sharing mechanism which governs the relationship between farmgate prices and dividends and distributions paid to investors.
The mechanism retains FMP as the primary measure of MG’s success and aligns the interests of external investors and suppliers through increased dividends as the FMP rises.
Managing director Gary Helou said implementing the proposed new capital structure would represent a milestone achievement.
The structure would give MG co-op member shares a market value for the first time.
“This is good news for our suppliers as lenders will recognise the value of their MG shares, thereby strengthening suppliers’ balance sheets,” Mr Helou said.
The capital structure’s creation was testament to the enduring strength of the co-operative – Australia’s biggest dairy product exporter and milk processor – and its 65-year history as a leader in delivering sustainably higher farmgate returns for suppliers.
“Together we have worked tirelessly to develop a capital structure that strikes the right balance between suppliers and external investors to maximise returns,” he said.
“We will use the capital raised to invest in world leading manufacturing and supply chain capabilities to improve efficiencies and increase market reach in key growth categories including consumer cheese, dairy beverages and nutritional powders.
“These initiatives will underpin higher returns to suppliers over the longer term as we capitalise on growing demand for value-added dairy food products in Australia and Asia.”
Source: Queensland CountryLife