The Australian arm of New Zealand dairy company Fonterra is up for sale. According to Australian media, FrieslandCampina has expressed serious interest. The company itself does not comment on those reports.
FrieslandCampina and Pacific Equity Partners (PEP) have made an unsolicited bid for part or all of the Australian arm of Fonterra, reports the authoritative newspaper The Australian. The newspaper relies on sources within the dairy industry.
FrieslandCampina and Australian investment company PEP are said to have made their bids known as early as the end of 2023. The Weekly Times newspaper recently stated that insiders say FrieslandCampina and France’s Lactalis are still in the race for Fonterra’s Australian operations. Both companies must then meet the requirements for foreign investment Down Under if they are to qualify.
‘FrieslandCampina: Not responding to rumors’
FrieslandCampina would neither confirm nor deny interest in the Australian branch. “As FrieslandCampina we never respond to speculation and rumors,” said spokeswoman Eline Leenaarts.
Dairy giant Fonterra is listed on the Australian stock exchange ASX. On July 24 this year, the company engaged investment banks Jarden, Craigs and JPMorgan to sell its dairy brands and ingredients business. The value of these stakes is estimated at €1.8 billion. The sale process should begin by the end of this year.
There are also said to be other candidates for Fonterra Australia, namely Canada’s Saputo and Australia’s Bega. However, these companies may face government opposition due to competition laws. The Australian Competition and Consumer Commission is expected to block a takeover by Saputo or Bega.
Recommendations for sale
Investment firms BGH Capital, Bain Capital, Affinity Equity Partners, CVC, Fountain Vest and PAG are also possible candidates for acquisition. An exploratory study, starting soon, should produce recommendations for sale. Incidentally, Fonterra has five other consumer businesses for sale, in other countries.
Fonterra Australia has for some time been part of Fonterra Oceania. That division is for sale in its entirety, and that includes Fonterra Brands in New Zealand, with brands such as Anchor, Anmum, De Winkel, Farm Source, Mainland, Perfect Italiano and Primo and the ingredient company New Zealand Milk Products (NZMP).
Unrest among dairy farmers
Fonterra Australia operates eight dairies in the states of Victoria and Tasmania. The company employs about 1,600 people and collects about 1.4 billion liters of milk annually from hundreds of Australian dairy farmers. Dairy farmers have been alarmed, however, because Fonterra’s departure may lead to reduced competition among processors.
Fonterra’s Australian arm is less profitable than its New Zealand operation. This is due to lower milk prices in New Zealand. Annual gross profit in Australia is about €180 million, although this figure fluctuates from year to year. In May this year, Fonterra announced its intention to divest its Australian operations.
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