Dairy processing cooperative Murray Goulburn has about 2,300 employees and operates 11 facilities in Australia and China.
Saputo, one of the 10 largest dairy processors in the world and already active in Australia, said it would finance the acquisition through a new bank loan.
"By acquiring a well-established industry player, the company reinforces its commitment to strengthen its presence in the Australian market," Saputo said in a statement.
The Canadian firm established itself in Australia in 2014 with the acquisition of the Warrnambool Group.
Murray Goulburn, which produces a full line of dairy products, has annual sales of about Aus$2.5 billion.
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"MG has reached a position where, as an independent company, its debt was simply too high given the significant milk loss," its chairman John Spark said in a separate statement.
Producers associated with the Australian dairy cooperative had turned to other markets after Murray Goulburn cut milk prices. Saputo said it was committed to raising prices.
The offer, which Murray Goulburn's board unanimously recommended "in the absence of a superior proposal," is subject to shareholder approval and customary conditions, including foreign investment approval and clearance by the Australian Competition and Consumer Commission, Saputo said.
The transaction is expected to be completed during the first half of 2018.
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