FrieslandCampina, in partnership with Pacific Equity Partners (PEP), has submitted an unsolicited bid to acquire part or all of Fonterra’s Australian operations.
The bids, reportedly made by the end of 2023, were confirmed by sources within the dairy industry and reported by The Australian newspaper.
FrieslandCampina and France’s Lactalis are among the key contenders for the acquisition, pending compliance with Australia’s stringent foreign investment regulations.
FrieslandCampina has not confirmed or denied its interest in the acquisition. “As FrieslandCampina, we never respond to speculation and rumors,” stated spokeswoman Eline Leenaarts.
Fonterra, listed on the Australian Securities Exchange (ASX), has enlisted investment banks Jarden, Craigs, and JPMorgan as of July 24 to facilitate the sale of its dairy brands and ingredients business, valued at approximately €1.8 billion. The sale process is expected to begin by the end of this year.
Potential bidders include Canada’s Saputo and Australia’s Bega, though they may face regulatory challenges due to competition laws.
The Australian Competition and Consumer Commission (ACCC) will likely scrutinize and potentially block any acquisition by these companies to ensure competitive market conditions.
Other investment firms are also running for the acquisition, including BGH Capital, Bain Capital, Affinity Equity Partners, CVC, Fountain Vest, and PAG. An exploratory study, which will provide recommendations for the sale, is set to start soon.
Fonterra Australia operates as part of Fonterra Oceania, which encompasses well-known brands such as Anchor, Anmum, De Winkel, Farm Source, Mainland, Perfect Italiano, and Primo, along with the ingredient company New Zealand Milk Products (NZMP).
It runs eight dairies across Victoria and Tasmania, employing around 1,600 people and collecting approximately 1.4 billion liters of milk annually from hundreds of Australian dairy farmers.
The potential sale has stirred concerns among dairy farmers, who worry that Fonterra’s exit could diminish competition among processors and impact milk prices.
Fonterra’s Australian operations are less profitable than those of its New Zealand business, mainly due to lower milk prices in New Zealand. The annual gross profit in Australia is around €180 million, though this figure fluctuates.
In May 2023, Fonterra announced its intention to divest its Australian division, fueling industry speculation and interest from potential buyers.
The outcome of this sale is expected to significantly impact the competitive landscape of the dairy industry in the region, influencing market dynamics, milk prices, and the overall structure of the dairy supply chain.
As the sale process advances, attention will be focused on regulatory reviews and potential bidders’ strategic actions, which will have far-reaching implications for the Australian dairy sector.
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