A$2B bid for Fonterra Oceania a positive signal
An A$2 billion bid for Fonterra's Oceania business would be great news, according to Forsyth Barr senior analyst, equities, Matt Montgomerie.
VDL, owned by the New Plymouth District Council’s investment company, controls 25 dairy farms and 30,000 dairy stock in northwest Tasmania. Founded in 1825, VDL is one of Australia's oldest companies.
A Fonterra spokesman told Rural News it “never comments on whether or not it is involved in these types of matters”.
Owning dairy farms in Australia will help Fonterra’s strategy to its boost its global milk supply pool. The co-op processes 1.7 billion litres of milk in Australia annually. However, strong competition for raw milk means Fonterra’s supply base has not kept pace.
VDL already supplies milk to Fonterra and owning the farms will allow the co-op to boost cow numbers and production.
Fonterra operates 10 factories in Australia but its consumer brands business has been struggling. The co-op is reducing its product range to try to rein in costs. Teaming up with China Investment will give potential to produce milk specifically for the Chinese market.
The purchase is expected to cost Fonterra and China Investment $A200m. No comment could be obtained from VDL chief executive Michael Guerin.
