Fonterra’s US$2.4B consumer business sale attracts global bidders

NEW ZEALAND – New Zealand’s dairy giant Fonterra is drawing significant interest from international companies for the sale of its global consumer businesses, valued at approximately US$2.4 billion. 

The cooperative is looking to divest its well-known brands and operations as part of a strategic shift toward focusing on dairy ingredients and foodservice sectors.

The consumer businesses up for sale include popular brands such as Anchor butter, Mainland cheese, Kapiti ice cream, and Anlene powdered milk. 

The deal also encompasses Fonterra’s Oceania and Sri Lanka units, which handle operations from milk collection to processing and supplying products to retail and foodservice channels.

This divestment is expected to reshape Fonterra’s portfolio, allowing it to streamline operations and prioritize high-value dairy ingredients.

Among the potential bidders are Japan’s Meiji Holdings, known for its dairy and confectionery products, France’s Lactalis, the world’s largest dairy producer, and Canada’s Saputo, a major player in cheese and dairy goods. 

Additionally, U.S.-based private equity firm Warburg Pincus has expressed interest, aiming to expand its portfolio in the food sector.

“We are carefully evaluating all strategic options to ensure the best outcome for our shareholders,” a Fonterra spokesperson said, emphasizing the confidentiality of the process.

Fonterra is also exploring an initial public offering (IPO) for the consumer businesses, which would be named Mainland Group if the IPO route is chosen. 

In February, Fonterra appointed René Dedoncker as CEO and Paul Victor as CFO to lead the potential standalone entity. 

“Our goal is to maximize value for our farmer shareholders, whether through a sale or an IPO,” Dedoncker stated. 

Before finalizing any decision, Fonterra plans to consult its farmer shareholders to vote on the preferred divestment option.

The operations targeted for sale represent a significant portion of Fonterra’s earnings, contributing about 19% to its operating profits in the first half of fiscal 2024. 

The cooperative’s shares have risen 8% this year, reflecting investor confidence in its restructuring plans, with Fonterra’s market value now standing at roughly US$4.3 billion.

However, the stock experienced a slight dip of 0.2% to US$2.68 per share on Thursday.

Analysts suggest the sale, expected to conclude by mid-2025, could attract further interest due to the global appeal of Fonterra’s brands. 

The transaction is seen as a pivotal move for Fonterra to strengthen its financial position and focus on core competencies in a competitive dairy market. 

As the process unfolds, the industry watches closely to see how this major deal will influence global dairy dynamics.

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