Wednesday, 06 October 2021 09:55

Will Aussies buy Fonterra?

Written by  Sudesh Kissun
Fonterra's Western Star butter is the number one butter brand in Australia. Fonterra's Western Star butter is the number one butter brand in Australia.

A planned public listing of Fonterra’s Australian business will attract investors, including dairy farmers, claims Freshagenda analyst Steve Spencer.

However, he believes a buyout by another Australian dairy player looks unlikely due to competition issues.

An ownership review of Fonterra Australia is underway as part of the co-operative’s new strategy to add value to its New Zealand milk.

Fonterra says any option would need to consider the co-op retaining a significant stake in Australia. Options could include partnering with a strategic or financial investor.

The ownership review should be completed by the end of this year but any change to the ownership structure is still 12 months away.

Fonterra claims the Australian business is in a strong position, not only in earnings but also reputation with its customers and importantly its farmers.

However, Spencer says investors will await the IPO documents to see how the Australian business gets carved out of the group results.

“There is not enough visibility to see that completely at this stage,” he told Rural News. “I think there will be investor appetite – depending on the pricing and performance that is laid out in an IPO.

“There are few opportunities for public and institutional investment in the food sector and the growth, depth and diversity of dairy markets is a good story.”

Spencer also expects Australian farmers, especially those who currently supply Fonterra, to be interested in buying shares.

“I’m sure there will be some interest but that will be clarified by the company in its engagement.”

But there will be few options for large players to take out this business without competition issues due to the crossover in product segments.

Spencer says Lactalis could be a potential buyer if the business suits their global business model.

“They don’t have competing opportunities in other markets – Saputo and Bega would be ruled out.”

Australian dairy consultant John Droppert believes farmers will wait and see what comes out of the ownership review.

“I suspect most suppliers will just be curious to see what comes of it and what the ongoing linkage to Fonterra global would be under any proposal,” Droppert told Rural News.

Fonterra Australia Suppliers Council chairman Alan Davenport hopes that ownership options could present opportunities to further align supplier interests.

“I look forward to working with Fonterra Australia to ensure any change to the ownership structure builds on the partnership between Fonterra Australia and its farmer suppliers,” says Davenport.

Fonterra is a market leader in Australia in butter and cheese with iconic brands like Western Star, Perfect Italiano and Bega.

More like this

Featured

Farmers urged not to be complacent about TB

New Zealand's TBfree programme has made great progress in reducing the impact of the disease on livestock herds, but there’s still a long way to go, according to Beef+Lamb NZ.

Editorial: Making wool great again

OPINION: Otago farmer and NZ First MP Mark Patterson is humble about the role that he’s played in mandating government agencies to use wool wherever possible in new and refurbished buildings.

National

Machinery & Products

Farmer-led group buys Novag

While the name and technology remain unchanged and new machines will continue to carry the Novag name, all the assets,…

Buhler name to go

Shareholders at a special meeting have approved a proposed deal that will see Buhler Industries, the publicly traded Versatile and…

» Latest Print Issues Online

The Hound

Make it 1000%!

OPINION: The appendage swinging contest between the US and China continues, with China hitting back with a new rate of…

Own goal

OPINION: The irony of President Trump’s tariff obsession is that the worst damage may be done to his own people.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter