Fonterra Divests Mainland and Anchor Brands in $4.22 Billion Deal

Fonterra Co-operative Group has announced the sale of its global Consumer brands, including Mainland and Anchor, to French dairy company Lactalis for $4.22 billion. This decision follows overwhelming approval from Fonterra’s farmer shareholders, with 88.47% voting in favor of the sale. The transaction represents a strategic refocus towards Fonterra's core strengths in high-margin ingredients and foodservice sectors.

The sale is the most significant structural change for Fonterra in its 23-year history. The divestment aims to simplify the business and concentrate on areas that offer high returns, such as specialized ingredients and profitable foodservice channels. The Consumer division, previously viewed as underperforming, will be handed over to Lactalis, although Fonterra will continue to supply raw milk and ingredients under a long-term agreement.

This agreement includes a provision for a tax-free capital return of $2 per share, totaling approximately $3.2 billion to be distributed to shareholders. This financial benefit is intended to enable farmers to reinject capital into their businesses. Despite the transfer of well-known brands, New Zealand's milk will still play a role in the products through the deal with Lactalis.

Critics, such as Winston Peters, have expressed concerns about the limited guarantee provided by the agreement, which includes a 10-year term with a three-year termination notice starting after the first three years. They argue that this could diminish New Zealand's capability to add value to its dairy products, effectively outsourcing this potential to a foreign entity.

The transaction, expected to finalize in the first half of 2026, will streamline Fonterra into a business-to-business dairy nutrition provider. The co-operative will now focus on maximizing the return from its grass-fed New Zealand milk, which is highly valued worldwide.