Lactalis to acquire Fonterra’s Consumer & Associated Businesses for US$2.25 B

AUSTRALIA – Fonterra, a dairy manufacturer, has agreed to sell its Consumer and associated businesses to Lactalis for NZD 3.845 billion (US$2.245 billion).

The sale comprises Fonterra’s global Consumer business (excluding Greater China) and Consumer brands; the integrated Foodservice and Ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business.

In addition to the base enterprise value of $3.845 billion, there is potential for a further $375 million increase from the inclusion of the Bega licences held by Fonterra’s Australian business, which if progressed would take the headline enterprise value of the transaction up to $4.220 billion.

Fonterra Chairman Peter McBride stated that over the last 15 months, the Board has thoroughly evaluated the terms and value of both a trade sale and an initial public offering (IPO) as divestment options.

“Following a highly competitive sale process with multiple interested bidders, the Fonterra Board is confident a sale to Lactalis is the highest value option for the Co-op, including over the long-term. Alongside a strong valuation for the businesses being divested, the sale allows for a full divestment of the assets by Fonterra, and a faster return of capital to the Co-op’s owners, when compared with an IPO.

“This, coupled with the firm belief we have in Fonterra’s long-term strategy, gives the Board the confidence to unanimously recommend this divestment to shareholders for approval,” said Mr McBride.

The Co-op is targeting a tax-free capital return of $2.00 per share, which is approximately $3.2 billion, following completion of the sale.

As part of the sale agreement, Fonterra will continue to supply milk and other products to the divested businesses, ensuring that New Zealand farmers’ milk will still be found in iconic dairy brands, including Anchor and Mainland.

Fonterra CEO Miles Hurrell said, “As the world’s largest dairy company, Lactalis has the scale required to take these brands and businesses to the next level. Fonterra farmers will continue to benefit from their success, with Lactalis to become one of our most significant Ingredients customers.

“At the same time, a divestment of these businesses will allow Fonterra to deliver further value for farmer shareholders and New Zealand by focusing on our world leading Ingredients and Foodservice businesses, through which we sell innovative products to more than 100 countries around the world, from our home base here in New Zealand,” says Mr Hurrell.

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