increase font size
Matt Montgomerie, Forsyth Barr.
An outright sale of Fonterra’s global consumer business is more likely than a float, says Forsyth Barr senior analyst equities, Matt Montgomerie.
He says this would allow a possible buyer to realise material synergies – like distribution & marketing – through greater scale by adding the Fonterra brands to an already wide consumer brand portfolio.
“We aren’t particularly surprised at Fonterra looking to float the consumer business – it has been well flagged in previous communication,” Montgomerie told Rural News.
“This doesn’t necessarily mean we view it as the most likely outcome though. We think an outright sale is more likely.”
Fonterra has announced that it will be engaging with potential buyers for its global consumer business and integrated business units, Fonterra Oceania and Sri Lanka.
At the same time, the co-operative is preparing for a possible initial public offering (IPO), saying its intention is to thoroughly test the terms and value of both a trade sale and IPO before selecting an option to put to farmer shareholders for a vote.
Fonterra has chosen Mainland Group as the corporate brand for the group if it is to proceed with an IPO.
Fonterra Co-operative Council chair John Stevenson told Rural News that Fonterra farmers will be pleased to see an update on the progress of the divestment process.
“We look forward to seeing the outcome of this next stage where the value and terms of both the potential IPO and trade sale are thoroughly tested.
“It is important to note that farmer shareholders will have to consider and vote on any final outcome.”
Fonterra hopes for “a significant capital return” to farmer shareholders and unit holders following the divestment.
Fonterra farmers are forecast to receive a record milk price – currently $10.25/kgMS – for this season. A high milk price means increased cost of production for the consumer business.
But Montgomerie says they don’t think the current high milk price will deter buyers.
“It is unfortunate timing for Fonterra trying to sell the Consumer business with high milk prices, given the squeeze this places on margins, however, earnings within a single period shouldn’t detract materially from the underlying business value, particularly given capital employed in the ‘in-scope’ businesses is $3.4 billion.”
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.
OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.
Fonterra has delivered a fifth straight year of record organic milk price for farmer suppliers.
Fonterra says favourable weather conditions supporting pasture growth is boosting milk production.
Like many manufacturers around the world, European agricultural machinery and tractor manufacturers are currently operating in a difficult market environment. But they are heading to the world’s largest agricultural machinery event in Hanover next month with a degree of cautious optimism.
Established in 2021, the John Deere Technician of the Year Awards champion the important contribution parts and service technicians make to the Australian and New Zealand agriculture, construction and forestry industries.
Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.
New Zealand is closer to eradicating bovine TB than ever before, but possums remain a threat, says Beef + Lamb New Zealand.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
The ACT Party says media reports that global dairy giant Nestle has withdrawn from the Dairy Methane Action Alliance shows why New Zealand needs to rethink its approach to climate.
OPINION: Ageing lefty Chris Trotter reckons that the decision to delay recognition of Palestinian statehood is more than just a fit…
OPINION: A mate of yours truly recently met someone at a BBQ who works at a big consulting firm who spent…
