Former milk processing co-operative Murray Goulburn has settled a class action for $42 million.
Known as the Endeavor River class action, it was launched in August last year on behalf of more than 1,300 investors who had purchased units in the Murray Goulburn Unit Trust between May 29, 2015 and April 27, 2016.
These units traded on the Australian Securities Exchange.
Legal group Slater and Gordon Practice Group leader Emma Pelka-Caven would not disclose the amount claimants were seeking, but she said it “wasn’t significantly higher” than the $42 million that they received.
“What we were claiming on behalf of our unit holders was the Murray Goulburn had misled the market, both in statements it made when it listed and its Product Disclosure Statement and over the next few months,” she said.
“Essentially what we were concerned about is that Murray Goulburn had not had reasonable grounds for the forecast it had given for its FY16 financial year.”
Murray Goulburn did not admit liability as part of the settlement and the settlement would also be subject to Federal Court approval.
The settlement of this class action left one pending class action against Murray Goulburn.
Known as the Webster Class Action, a statement from Murray Goulburn said court ordered mediation would occur on or before November 8, 2019 with a trial listed to start on February 5 next year.
Murray Goulburn units lifted 13.5 per cent to 0.335 cents in Monday morning ASX trading.
‘A commercial decision’
A statement from Murray Goulburn said the $42 million settlement included interest and costs with about 80 per cent of this funded by insurance.
“MG will contribute the remaining portion of the settlement amount and intends to recover this amount from an insurer third party,” the statement said.
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MG said the settlement was a “commercial decision made in the best interests of MG Shareholders and Unitholders in the MG Unit Trust”.
Murray Goulburn was asked if insurance could cover a settlement or costs of the second class action.
It said it would not comment on arrangements with insurers as they were confidential.
It also said any further distribution to shareholders and unitholders will be considered by the Board on a periodic basis.
MG reported to the ASX on April 15 that it held $272 million — or 49 cents per share or unit — for the 554,665,638 shares and units on issue.
MG was sold to Canadian dairy giant Saputo in May last year for $1.31 billion.
This came after Murray Goulburn dropped the farmgate milk price it paid suppliers in April 2016, a move followed by Fonterra Australia.
This triggered what was known as the ‘dairy crisis’ and resulted in a number of dairy farmers switching milk companies or exiting in the industry.
As part of that transaction between Murray Goulburn and Saputo, shareholders and unit holders received 80 cents for each share they owned.
Many dairy farmer suppliers had paid a minimum of $1 a share to secure shares when supplying the co-operative.
Money was retained, following the transaction, so MG could pay a farmgate milk price set-up and a farmer supplier ‘retention payment’ when the sale was concluded.
At the time, MG flagged it would also retain a further $195 million for any potential exposure under the retained litigation that MG retained responsibility for, costs associated with this litigation and operational costs.