(Yicai Global) Oct. 30 -- Australian dairy giant Murray Goulburn Co-operative Co. said it has entered into a binding agreement to sell all of its operating assets and liabilities to Canada's Saputo Inc. [TSE:SAP] for USD1.01 billion (AUD1.31 billion).

Murray Goulburn's sale attracted several international bidders including China's two largest dairy groups -- China Mengniu Dairy Co. [HK:2319] and Inner Mongolia Yili Industrial Group Co. [SHA:600887].

Aside from agreeing to pay AUD1.31 billion, Saputo has made a series of milk collection and milk price commitments to Murray Goulburn's dairy farmers, the Southbank-based firm said. From next month, Murray Goulburn will increase its milk payout by AUD0.4 to AUD5.6 per kilogram of milk solids (kgMS) for the fiscal year 2018. The change was also used for milk supplied from July to October of this year. Saputo will also give an extra AUD0.4 per kgMS to Murray Goulburn's core dairy farmers as a loyalty payment.

As one of the world's top 10 dairy processors, Saputo has been active in the Australian market since it acquired Warrnambool Cheese and Butter Factory Co. Saputo is not well-known in the Chinese market. Saputo only exports ordinary dairy products such as butter, skim milk powder and other milk powers to China, per China's Certification and Accreditation Administration's website.

Yili and Mengniu Dairy are both among the top 10 dairy processors and are not weaker than Saputo in terms of corporate strength or bidding ability. Murray Goulburn's decision to choose Saputo may have been related to dairy farmers' interests.

For Murray Goulburn's board, the buyer's ability to fulfill its commitment to dairy farmers is more important than its ability to pay the acquisition price and the board puts more emphasis on the acquirer's familiarity with the company's cooperative model and ability to consolidate and operate its business in future, Ausnutria Dairy Corp. [HK:1717] Chairman Yan Weibin, who is familiar with Australia's dairy industry, told Yicai Global.

Murray Goulburn plays a key role in the Australian dairy sector. As the country's largest dairy cooperative, Murray Goulburn highly values dairy farmers' interest. Last year, the cooperative managed to pay higher prices to dairy farmers for their milk when global dairy prices were on the decline, Yan found during his visit to the cooperative. Based on Saputo's milk price offer, the two Chinese dairy giants may not have scored high in this regard, said Dou Ming, dairy magazine Hesitan's editor-in-chief.