What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
Fonterra will acquire the processing equipment, the related services, and intellectual property and trademark for the Tamar Valley Dairy brand. The acquisition is effective towards the end of November (subject to completion of the sale), with the exact date to be confirmed.
"Fonterra is a long-standing partner of Tamar Valley Dairy, and has supported and worked closely with the administrators of the family-owned business during what has recently been a difficult period for the Tasmanian business and its founders," says Judith Swales, managing director, Fonterra Australia.
"The founding family has created a business with strong capability and innovation, known for producing new yoghurt formats and formulations, and in a relatively short timeframe they have built a national brand in Tamar Valley Dairy."
Fonterra plans to invest further to improve the manufacturing assets, upgrade quality and safety systems, invest in people in the business, and build capability for further innovation in the yoghurt category.
The Tamar Valley Dairy site will be fully integrated into Fonterra's Tasmanian and Australian manufacturing footprint, creating greater efficiencies and scale, while ensuring that Tamar Valley Dairy's innovation and its Tasmanian origin continues.
"Fonterra is committed to the total value chain in Tasmania - from farmers, to employees, suppliers and services, and to the current and future Australian customers and consumers the world-class operation and its products will attract.
"Acquiring the Tamar Valley Dairy yoghurt business is an important step in strengthening Fonterra's strong national position in the chilled dairy segment in Australia, and complements our existing yoghurt portfolio, where we hold a market-leading position in mainstream yoghurt through the Nestlé SKI brand.
"In reaching today's agreement, the parties have worked closely to move the business forward, while addressing two key considerations - that the business remains in Tasmania, which Fonterra is committed to, and that as many Tamar Valley Dairy employees as possible remain employed," Ms Swales says.
Over the next month, Fonterra will work closely with the people at Tamar Valley Dairy to determine the roles and right employees for these roles to ensure a seamless transition and continuity of operations under Fonterra ownership.
"Tamar Valley Dairy has a strong future. We see tremendous opportunities to build a sustainable, competitive business for the long term."
In Tasmania, Fonterra operates two manufacturing facilities at Spreyton and Wynyard, and is responsible for processing over half of Tasmania's milk. Fonterra collects almost 500 million litres of milk from almost 260 dairy farms each year, and employs 220 people. Over the last two years Fonterra has invested $20 million in these operations
