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Murray Goulburn (ASX: MGC) has settled one of its class actions, known as the Endeavour River class action, for $42 million.
Slater and Gordon launched the suit on 16 August 2018, acting on behalf of aggrieved Murray Goulburn shareholders who the firm argued suffered losses at the hands of misleading and deceptive conduct.
The key allegation in the class action was that Murray Goulburn and its subsidiary MG Responsible Entity (MGRE) engaged in deceptive conduct through financial forecast statements it made to the market during FY16.
It began when MGRE issued a product disclosure statement in May 2015 that forecast a FY16 profit of $85 million.
Nine months later, the company downgraded this figure to $63 million, blaming atypically weak dairy prices.
Then in April 2016, Murray Goulburn dropped its forecast again to between $39-42 million, this time citing a weak growth in Chinese demand for milk and unfavourable exchange rates between AUD-USD.
In short, it was alleged that Murray Goulburn misled the market by withholding share price-sensitive information which caused the trading of its shares to be at a "price significantly above their true value", according to the case breakdown by Slater and Gordon.
The class action was funded by IMF Bentham (ASX: IMF) and featured Endeavour River Pty Ltd as lead applicant.
In a statement to the ASX, Murray Goulburn said the $42 million settlement will be majority funded by insurance.
"The boards of Murray Goulburn and MGRE determined that the agreement to settle the Endeavour River class action was a commercial decision made in the best interests of MG shareholders and unitholders in the MG Trust," said the company.
"The settlement of the Endeavour River Class action, which is without admission of liability, is subject to Federal Court approval."
While the Endeavour River class action successfully avoided court, a second class action may yet go to trial within the next year.
The second Webster class action was initially brought by the Australian Competition and Consumer Commission (ACCC) and later transferred to the Federal Court.
John Webster is the class action's representative applicant who suffered capital losses of more than $31,000 as a result of alleged misleading and deceptive conduct by Murray Goulburn.
No resolution was reached in the mediation on 30 May 2019 and a further court ordered mediation will take place on or before 8 November.
The trial for the Webster class action remains listed to commence on 5 February 2020.
MGC shares are currently trading at $0.29. This is roughly the same as its April 2016 price, before shares halved to $0.15 in May 2016.
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