Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
This follows Fonterra and Australian listed dairy processor Bega Cheese resolving a dispute related to Bega licences.
Last week Fonterra announced the sale of its global consumer business (excluding Greater China) and consumer brands; the integrated foodservice and ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business to Lactalis for $3.845 billion.
The co-op foreshadowed that there was potential for a further $375 million increase from the inclusion of the Bega licences held by Fonterra’s Australian business.
This morning Fonterra informed the NZ Stock Exchange that the dispute has been resolved.
“Bega agrees that the structure of the sale to Lactalis of Fonterra’s global Consumer and associated businesses does not constitute a change of control under the Bega licences,” Fonterra says.
“As a result, the Bega licences held by Fonterra’s Australian business will be included in the divestment. As previously announced, Lactalis will pay Fonterra $375 million for the Bega licences in addition to the $3.845 billion base enterprise value, bringing the total proceeds for the sale of the Consumer and associated businesses to $4.22 billion. Fonterra has agreed to pay Bega’s legal costs to resolve the dispute.”
Read More:
- Fonterra seeks strong farmer mandate for sale
- A great outcome - Hurrell
- Lactalis to buy Fonterra's consumer business for $3.8b
The sale is subject to certain customary financial adjustments and conditions including approval by farmer shareholders, separating the businesses being sold from Fonterra, and receipt of certain final regulatory approvals.
Fonterra’s farmer shareholders are in for a $3.2b windfall – the co-op is targeting a tax-free capital return of $2/share, which is approximately $3.2 billion, following completion of the sale.
As part of the sale agreement, Fonterra will continue to supply milk and other products to the divested businesses, meaning New Zealand farmers’ milk will still be found in iconic dairy brands including Anchor and Mainland.
