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.
In a post on X, Peters said farmers and the public need answers.
“Is Fonterra’s “long-term agreement” for three, four, or ten years?
“Whatever the number, the clock will stop, and New Zealand’s milk will become just another in a long line of milk jugs. What stops Lactalis from diluting “New Zealand” products with vegetable fat and lower-quality milk?”
Peters also asked if chief executive Miles Hurrell and Fonterra executives stand to earn huge bonuses from this deal.
“If so, how much? Is it also true that they plan to leave the company after this deal is done,” he asked.
He said dairy companies that own their consumer brands have direct relationships with the customer.
“Anchor is a flagship brand, with a legacy built by generations since 1886 and more than 130 years of marketing New Zealand milk to the world, developing the products, building customer and consumer trust.
“For $4 billion, we are giving it away. No successful milk futures market exists globally - so why does Fonterra think it will succeed where others have failed?
“Other dairy giants, like the company they seek to sell to thrive because of their consumer brands. Every dollar earned must reflect New Zealand’s value add: turning milk into quality products creates jobs, income, and a future in New Zealand.
“Fonterra say that affording to grow these brands is beyond them.”
Responding to Peters, a Fonterra spokesman told Rural News that they have been engaging with farmers on the strategic rationale for the divestment for the last 16 months, with the terms of the divestment proposal discussed in detail with farmers over the last few weeks through extensive farmer engagement activity.
It summarised the supply agreements with Lactalis.
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Raw milk supply agreement – initial term is 10 years, and it automatically renews until terminated, with a 36 month notice period.
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Global supply agreement (Ingredients and other products) - initial term is 3 years and it automatically renews until terminated, with a 36 month notice period.
“We can also confirm there is no bonus payment for management team members tied to the completion of the transaction or outcome of the shareholder vote. Our executive remuneration framework is disclosed in our annual report each year.
“The board’s decision to pursue this divestment is grounded in an understanding of how Fonterra earns farmers returns on their milk and the capital they have invested in their farms and the co-op,” it says.
“By far we do this best through our global Ingredients and Foodservice businesses, which have consistently utilised the majority of farmers’ milk and generated the majority of the co-op’s returns through both the Farmgate Milk Price and dividends.”
It said Lactalis will become one of Fonterra’s most significant Ingredients customers who the co-op will work closely with through a long-term strategic partnership.
Fonterra says ultimately, the decision to divest the Mainland Group business to Lactalis sits with Fonterra’s farmer owners. Voting has opened and the results will be announced at a special general meeting online on October 30. For the sale to proceed, at least 50.1% of votes need to be cast in favour.
