Dairy farmers have responded with fury to the news that Australian dairy co-operative Murray Goulburn will be sold to Canadian dairy giant Saputo for $1.3 billion.

The deal, forced by the co-op’s mounting debts and dwindling milk supplies, saw the Canadian corporation outbid Bega Cheese and New Zealand’s Fonterra.

Murray Goulburn chairman John Spark said the sale to Saputo was the dairy co-operative’s best option given its high debt and a significant loss of milk suppliers which had slashed available product.

“MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss,” Mr Spark said in a statement on Friday.

“The board believes that the transaction represents the best available outcome for our suppliers and our investors,” he said.

But some of the co-op’s dairy farmers were unconvinced, venting their anger over the sale at a shareholder meeting.

They claimed the organisation had been poorly run, and that it communicated badly with suppliers. They said the management had now “capitulated”.

The deal concludes a strategic review process begun in July, that resulted in a number of proposals from other dairy operators including Bega Cheese.

CEO Ari Mervis acknowledged in a speech to the co-operative’s annual general meeting on Friday that the deal was “perhaps not a universally popular outcome” with shareholders.

Suppliers have been leaving Murray Goulburn ever since the debt-laden processor slashed the prices it was paying for milk in April, 2016 and introduced a deeply unpopular support scheme that required farmers to repay loans made to compensate for the price cut.

The co-operative dropped the support scheme, shut down three plants and cut 360 jobs in May, 2017, in moves to restructure its finances but the farmer exodus continued.

Dairy farmers will receive a boost to the price paid for their milk as part of Murray Goulburn’s agreement to sell to Saputo, which already owns Australian dairy processor Warrnambool Cheese and Butter.

Mr Spark pointed to Saputo’s local presence via the Warrnambool acquisition as a factor in Murray Goulburn’s support for the deal.

“Saputo is one of the top 10 dairy processors in the world,” he said.

The $1.31 billion deal, which is unanimously supported by the Murray Goulburn board, includes the co-operative’s operating assets and liabilities.

The transaction will involve an increase in the price that Murray Goulburn pays to dairy farmers for their milk, with the price to rise by 40 cents, to $5.60 per kilogram of milk solids for milk supplied from November 1 2017, and upon completion of the transaction for milk supplied from July to October 2017.

Dairy farmers who are supplying Murray Goulburn will get an extra 40 cents per kilogram of milk solids as a loyalty payment in 2017/18.

The deal requires approval by shareholders, the ACCC and the Foreign Investments Review Board.

Murray Goulburn unit trust units were up 2.5 cents, or three per cent, to 85.5 cents at 11.41 AEDT.

– with AAP