Fonterra shares react in anticipation of capital return when and if any sale goes through.
Fonterra’s supply share price has risen and the discount to the shareholders’ fund units narrowed in expectation of a shareholder capital return from the potential sale of Mainland Group.
FCG shares are $4.59 currently, close to double their price a year ago, while FSF units have risen steadily to $6.18, which is 75% higher than in May 2024.
An independent report on Fonterra’s FY2025 first half results by Northington Partners for the Fonterra Co-operative Council makes comments on the proposed divestment of the Mainland Group of consumer businesses.
Northington said the pricing discount for farmer-only FCG shares has narrowed compared with the 35% discount prior to the announcement of the potential consumer divestment.
Post-divestment targets for return on capital will be 10-12% compared with 8-10% currently, Northington noted.
“Any decision to divest and the required shareholder consultation is likely to occur over the next few months.”
The Australian assets of Fonterra make up a majority of the proposed Mainland Group divestments.
Australian dairy industry commentators say that three multinational companies and the Australian Bega Group are interested in purchasing.
The three internationals are Lactalis of France, the world’s largest dairy processor; Friesland Campina in the Netherlands; and Meiji Holdings of Japan.
One commentator said that a trade sale of Mainland was more likely than an initial public offering because it is a diverse but attractive set of assets for an offshore buyer.
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