Beston Global Food to be liquidated after years of losses

Beston Global Food will be liquidated after the dairy company’s former directors failed to pull together a credible bailout strategy.

Roger Sexton was chairman of Beston Global Food Company.

Beston Global Food has been placed in liquidation, after the former directors of the collapsed dairy company failed to mount a convincing rescue campaign for the business, which had never turned a profit.

The company’s administrator, and now liquidator, KPMG’s Tim Mableson, said in a recent report to creditors that it was their opinion the company, which was placed in voluntary administration in September, was likely insolvent “from at least April 4, 2024”.

“Given the extent of losses incurred in prior periods, the date of insolvency may be earlier and would be subject to further and more detailed investigations which would be undertaken by a liquidator should the companies be wound up at the second meeting (of creditors),’’ the creditors’ report says.

Beston's operations were wound down in early December with the loss of about 150 jobs, mainly in the dairy sector in South Australia, after the company collapsed under a large debt load.

KPMG urgently tried to sell the business as a going concern, but was forced to shutter the operations after no binding offers for the business were received.

Three non-binding offers for the business were short-listed, including one from chairman Roger Sexton, “on behalf of the directors’’ the report says.

“The administrators formed a view that the directors’ proposal received on October 25, 2024, was incapable of being progressed at that stage as it lacked detail in relation to a number of key terms, including the proposed transaction structure, funding and timing,’’ the report says.

A later update indicated the directors were seeking to secure funding through the National Reconstruction Fund, via a second-tier bank they were working with, however the administrators said they believed the NRF application was unsuccessful.

Beston grew its milk supply strongly but failed to achieve profitability.

The directors continued to work on a proposal throughout December, even as the administrators prepared to start selling Beston’s assets.

“The directors’ alternative proposal was based on interest received from existing customers of the business and would involve a staged process structured around funding commitments they had received to date (although had only been able to provide evidence to the administrators in writing of a commitment for $5m),’’ the report says.

The administrators told the directors on December 27 that they had accepted offers for the asset sales, however the report states that the directors still believed that their proposal would “produce a better result for all stakeholders than a liquidation”, and said they would continue working on it until the end of January.

“Representations from the directors as to what may happen by the end of January, 2025, in regards to a potential deed of company arrangement proposal did not provide any assurance for creditors,’’ KPMG said.

“On December 30, 2024, the administrators responded that to date and in just over three months since the voluntary administration commenced, no binding DOCA proposal has been received from the directors or any other former director or any third party.

“The administrators have accordingly continued to progress the voluntary administration in the best interests of the general body of creditors as a whole.”

When it collapsed, Beston, which listed on the ASX in 2015, owed $72.1m to its creditors, with $52.5m of that owed to NAB. Dairy farmers which supplied Beston were also owed $11.6m.

The estimated return to unsecured creditors in the event of a liquidation has not yet been revealed.

The creditors’ report indicates the business failed due to “exceptionally high” operating costs in areas such as energy and transport, poor operational performance of the main cheese and whey powder business, and rules under the Australian Dairy Code Legislation which disconnected Australian farmgate milk prices from global commodity prices.

It also noted there were several unsuccessful attempts to restructure the business via a recapitalisation or asset sale.

“Most notably, the companies were unable to reach an agreement with (Japanese company) Megmilk on commercially acceptable terms for an asset sale involving both Murray Bridge and Jervois production facilities,’’ the report says.

The report also says there were potential claims which could be investigated by the liquidator, including an insolvent trading claim and unreasonable director-related transactions.

“These, and other potential claims, will require further investigation by a liquidator, including the potential for public examinations to obtain further information and explanation,’’ the creditors’ report says.

The director-related transactions relate to the former structure, dismantled in 2021, under which directors Dr Sexton and Stephen Gerlach managed the executive functions of Beston via a vehicle called BPAM which was paid a management fee.

Dr Sexton said there was no credence to the suggestion either claim could successfully be pursued, saying the directors had always taken independent legal and financial advice, and the transactions with BPAM were set out in the prospectus and approved by shareholders.

KPMG said it had accepted offers for the sale of plant and equipment at the Murray Bridge and Jervois facilities which would raise $12.9m.

The Murray Bridge land and facility owned by Beston is currently subject to a sale offer while the Jervois facility is expected to go on the market shortly.

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