That’s according to Bell Potter analyst Jonathan Snape, who ran the numbers on a hypothetical scenario of Bega Cheese acquiring Fonterra’s Australian business, which the New Zealand milk giant put into play last month.

A key appeal for Bega Cheese would be to claw back control of Bega’s trademark in cheese and butter products, Snape said in an October 4 research note.

In 2001, Fonterra Australia and Bega Cheese signed a 25-year exclusive trademark licensing agreement. Fonterra got to use Bega’s name on natural and processed cheddar cheese, string cheese and butter products sold in Australia. In return, it paid Bega Cheese royalties based on retail sales of these products.

The licence’s initial term ends in May 2026, but Fonterra has the right to renew as long as it sticks by the rules, which include things like managing the Bega brand responsibly.

Snape said change of control provisions could make it difficult for other bidders to make a full offer for Fonterra Australia.

As other merits of combining the two businesses, Bell Potter estimates synergies of $35 million to $45 million.

This would come from removing duplicate corporate and marketing costs across the two businesses (as Bega did with Lion Dairy and Drinks Portfolio, for example) consolidating cold chain distribution assets, and from consolidating cut, wrap and shred operations (as Bega did with Dairy Country).

Lastly, Bell Potter thinks the hypothetical transaction would not raise too many flags with Australian Competition and Consumer Commission.

Fonterra’s Australia’s main revenue drivers are products like Western Star butter, Bega cheese brand and the Perfect Italiano cheese brand — segments where Bega Cheese doesn’t have a large presence.

Their combined footprint in Gippsland and Tasmania is also likely to sail through ACCC, the note said.

But Fonterra’s Stanhope facility competes directly with Bega’s Tatura facility, while Bega’s Cobden asset may flag the most attention, Bell Potter said. However it thinks divesting the Cobden asset, if required, wouldn’t be too burdensome.

In all, Bell Potter is convinced the two would be a good match for each other and for Bega’s shareholders.

“Assuming BGA acquired Fonterra at a multiple comparable to past transactions (13-15x EBITDA) and extracted the midpoint of our synergy range, then we estimate such a transaction has the scope to be double digit EPS accretive,” Snape said in the note.

Fonterra’s Australian business did $NZ1.7 billion in revenue last financial year and runs eight manufacturing sites. Fonterra previously flagged an IPO as a potential way to spin it out, but wants to retain a meaningful stake given Australia remains an important export market for its New Zealand milk.

Fonterra was set to mail out formal request for proposals to investment banks for the IPO mandates, last week.