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.
Later this month, Fonterra shareholders will hold a special online meeting to approve a capital return of $2/share or about $3.2 billion to shareholders and unit holders.
In August 2025, Fonterra agreed to sell its major brands such as Mainland and Anchor and Bega licenses held by Fonterra’s Australian business for $4.22b to French company Lactalis. About 89% of voting farmer shareholders backed the deal.
In an email to farmer shareholders recently, Fonterra chairman Peter McBride said the sale remains subject to receiving certain regulatory approvals and separation of the business from Fonterra.
Lactalis has received approval from Australia’s Foreign Investment Review Board (FIRB) for the acquisition.
“The separation activity is also progressing well and, provided the remaining regulatory approvals are received within the expected timeframes, the co-op now expects the transaction to be complete in the first quarter of the 2026 calendar year,” he says.
“Holding the shareholder vote on the capital return in February will enable us to return capital to shareholders and unit holders as soon as possible after the transaction is complete.”
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The special meeting, to be held online on February 19, requires approval by at least 75% of the votes cast on the resolution.
McBride told shareholders that if they approve the return of capital at the special meeting, there’s nothing they need to do after that.
“Fonterra will seek final court approval to undertake the capital return subject to divestment completion,” he says.
The record date for being eligible for the capital return will be within the five business days prior to the payment being made to shareholders and unitholders.
Tax-Free Payment
The capital return will be a pro rata return of capital effected by a court-approved scheme of arrangement under Part 15 of the Companies Act 1993.
Fonterra chair Peter McBride says the mechanics of how this will work are complex, including a share buyback and then cancellation and subdivision of shares so that farmers hold the same number of shares after the capital return as they did beforehand.
“This is designed to ensure no shareholder’s compliance with the co-op’s minimum shareholding requirements or their voting entitlement is affected by the capital return.
“As previously indicated, the payment should be tax-free, although it is recommended that shareholders and unit holders obtain independent tax advice on the effect of the capital return based on their individual circumstances.”
