Fonterra, New Zealand’s leading dairy cooperative, is set to launch a dual-track process in 2025 to divest $2 billion in assets as part of a broader global restructuring. The move includes Australian consumer, food service, and ingredients businesses, as well as Fonterra Brands in New Zealand. The company aims for a dual listing on both the Australian and New Zealand stock exchanges, with major industry players showing interest in the assets.
Fonterra, New Zealand’s largest dairy cooperative, has announced plans to initiate a significant dual-track process in early 2025, aiming to divest assets worth $2 billion under its Fonterra Oceania division. This strategic move is part of a broader global realignment, as the company seeks to divest around $4 billion in assets, with a substantial portion of these assets located in its Australia and New Zealand (ANZ) markets. The announcement was made public on November 13, 2024, as the cooperative embarks on a major restructuring of its global operations.
The assets slated for divestment include Fonterra’s Australian consumer, food service, and ingredients businesses, as well as its New Zealand-based Fonterra Brands. The company is also looking to offload its global consumer businesses and operations in Sri Lanka. Among the prominent brands that may be sold are Anchor, Western Star butter, and Mainland and Perfect Italiano cheese lines.
Fonterra’s move towards a dual-track process, involving the possibility of a dual listing on both the Australian and New Zealand stock exchanges, follows a prior attempt at an IPO for its Australian consumer business. Although an initial public offering was paused due to unfavorable market conditions in 2021, the company is now working with JPMorgan, Jarden, and Craigs to lead the process, with other financial institutions expected to join.
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The decision to consider a listing, rather than a full trade sale, is heavily influenced by a key licensing agreement with Bega, an Australian food company. Should Fonterra opt for a full sale, it risks losing its rights to use the Bega brand. However, by retaining a 50% stake in the assets, the company could continue its licensing relationship with Bega, a move that may incentivize the cooperative to pursue a listing instead of a complete divestment. Industry giants such as Lactalis, FrieslandCampina, Danone, and private equity firms like Kohlberg Kravis Roberts, Permira, and Pacific Equity Partners have expressed interest in Fonterra’s assets.
Fonterra’s decision to divest these assets comes at a time when its Australian business faces challenges, including higher milk supply costs compared to its New Zealand operations. As farm gate milk prices in Australia exceed those in New Zealand, the company is looking to streamline its operations and focus on more profitable regions.
With the planned divestments, Fonterra aims to optimize its global portfolio and increase its focus on core markets and products. The strategic realignment could signal a new phase in the company’s growth, as it adapts to changing market dynamics in the dairy sector.
This move comes as part of Fonterra’s ongoing effort to strengthen its position as a global leader in the dairy industry while facing the challenges of evolving market conditions in both its domestic and international operations.