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Published May 07, 2015, 09:00 AM

Australia's Murray Goulburn likely to get listing go-ahead, to test appetite for dairy

SYDNEY - A $400 million public listing by Australia's largest dairy producer, Murray Goulburn Co-operative Co Ltd, is on track for July, with cooperative members expected to give the go-ahead for the plan on Friday.

By: Colin Packham, Reuters

SYDNEY - A $400 million public listing by Australia's largest dairy producer, Murray Goulburn Co-operative Co Ltd, is on track for July, with cooperative members expected to give the go-ahead for the plan on Friday.

A fund-raising would test investor appetite for a sector that expects strong long-term growth as Asia develops a taste for dairy products, but which has been battling prices near six-year lows due to Russian import bans and as Europe deregulates its milk industry.

Members of the cooperative, which accounts for nearly half of dairy output in the world's No.4 producer, told Reuters the move was likely to gain the 50-percent support it needed at a member meeting on Friday.

"I have voted for it," said Stuart Crosthwaite, owner of North East Murray Dairy, one of the cooperative's 2,500 members. "Where we farm, Murray Goulburn buys maybe 95 percent of the milk and I have not heard anything negative about the proposal."

Under the plan, Murray Goulburn would keep its co-operative structure but would allow external investors to buy non-voting shares via a unit trust listed on the Australian Securities Exchange (ASX).

Those investors would be entitled to dividends, with the model similar to a structure used by the world's biggest dairy exporter, New Zealand's Fonterra Co-operative Group Ltd .

Murray Goulburn has said it would use the funds to shift away from simply selling milk to supplying high-value nutritional food, dairy beverages and cheese products to Asia's expanding middle class. It hopes the strategy will allow it to offer higher so-called farmgate prices for milk to its members.

Murray Goulburn said that when milk prices are lower, a greater percentage of profits will be allocated to farmers, while unit investors will earn greater dividends when prices are higher.

But some analysts said that the interests of investors and cooperative members would diverge.

"Somebody has to lose out in the process. You can't have high farmgate milk prices and deliver profitability to your investors," said Mark Topy, analyst at wealth management firm, Canaccord Genuity.

Murray Goulburn did not respond to requests for comment, but Garry Helou, managing director of Murray Goulburn, told local media that investors would be aware of the structure before investing, removing any conflict of interest.

Prior to stock market listing of the unit, Murray Goulburn will allow farmers to buy shares at a discounted rate of between A$1-A$1.24.

According to Murray Goulburn's prospectus, the company expects the IPO price to be higher than A$1.24.

Macquarie Capital and Lazard are advising on the deal.

Rabobank said in a March report that it expected dairy demand growth of 2 percent a year up to 2020, although prices will remain under pressure for the rest of the year.

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