Fonterra Set to Launch $2 Billion Dual-Track Process in 2025
Source: DairyNews.today
Fonterra is gearing up for a significant move in early 2025, as it embarks on a dual-track process for the divestment of assets valued at $2 billion under its Fonterra Oceania division. This initiative is part of a broader plan in which the New Zealand-based dairy giant aims to divest approximately $4 billion in assets worldwide, with roughly half of these assets located in its Australia and New Zealand (ANZ) markets.
Industry insiders anticipate that Fonterra will likely pursue a dual listing on both the Australian and New Zealand stock exchanges next year, rather than opting for a complete trade sale of its Oceania assets. The assets earmarked for divestment include its Australian consumer, food service, and ingredients business, along with New Zealand’s Fonterra Brands, which have been consolidated under the Fonterra Oceania unit. Also on the divestment list are Fonterra’s global consumer businesses and its Sri Lanka operations. Among the well-known Australian and New Zealand brands up for sale are Anchor, Western Star butter, and the Mainland and Perfect Italiano cheese lines.
Fonterra has also identified additional non-core assets across Asia, China, the Middle East, Africa, and the Americas for potential divestment, as part of its global realignment strategy. Previously, Fonterra engaged Jarden and UBS in 2021 to lead an IPO of its Australian consumer business, but the project was paused due to unfavorable market conditions. Now, JPMorgan, Jarden, and Craigs are back on board, with the potential for other financial institutions to join the process.
A notable factor favoring a dual listing is the Bega brand licensing arrangement. A full sale of the ANZ brands business would terminate Fonterra's right to use the Bega brand, but a float where Fonterra retains 50% would allow it to retain Bega’s licensing rights. This clause could incentivize Fonterra to lean toward a listing, although Bega may emerge as a potential buyer, possibly in collaboration with other strategic partners.
Several industry players have expressed interest in Fonterra's assets, including global dairy leaders Lactalis, FrieslandCampina, and Danone, along with private equity firms such as Kohlberg Kravis Roberts, Permira, and Pacific Equity Partners. However, Fonterra's Australian business faces challenges, as its earnings margins are less robust than those in New Zealand, where milk supply costs are significantly lower. The price dynamics have created a disparity between the two regions, with Australian farm gate milk prices currently exceeding those in New Zealand.
Logistics Acquisition by DP World
In a related development, DP World has enlisted advisory firm Gresham to assist in acquiring Silk Logistics, an Australian-listed logistics company. The transaction, valued at approximately $200 million, would place Silk Logistics’ equity valuation at around $175 million, with Barrenjoey advising Silk on defensive measures.
These strategic moves by Fonterra and DP World reflect an evolving market landscape as companies navigate asset optimization and expansion opportunities across sectors and regions.
Fonterra has also identified additional non-core assets across Asia, China, the Middle East, Africa, and the Americas for potential divestment, as part of its global realignment strategy. Previously, Fonterra engaged Jarden and UBS in 2021 to lead an IPO of its Australian consumer business, but the project was paused due to unfavorable market conditions. Now, JPMorgan, Jarden, and Craigs are back on board, with the potential for other financial institutions to join the process.
A notable factor favoring a dual listing is the Bega brand licensing arrangement. A full sale of the ANZ brands business would terminate Fonterra's right to use the Bega brand, but a float where Fonterra retains 50% would allow it to retain Bega’s licensing rights. This clause could incentivize Fonterra to lean toward a listing, although Bega may emerge as a potential buyer, possibly in collaboration with other strategic partners.
Several industry players have expressed interest in Fonterra's assets, including global dairy leaders Lactalis, FrieslandCampina, and Danone, along with private equity firms such as Kohlberg Kravis Roberts, Permira, and Pacific Equity Partners. However, Fonterra's Australian business faces challenges, as its earnings margins are less robust than those in New Zealand, where milk supply costs are significantly lower. The price dynamics have created a disparity between the two regions, with Australian farm gate milk prices currently exceeding those in New Zealand.
Logistics Acquisition by DP World
In a related development, DP World has enlisted advisory firm Gresham to assist in acquiring Silk Logistics, an Australian-listed logistics company. The transaction, valued at approximately $200 million, would place Silk Logistics’ equity valuation at around $175 million, with Barrenjoey advising Silk on defensive measures.
These strategic moves by Fonterra and DP World reflect an evolving market landscape as companies navigate asset optimization and expansion opportunities across sectors and regions.
