Fonterra Explores Global Consumer Business Sale or IPO Amidst High Milk Prices

Leading dairy cooperative, Fonterra, is testing the waters for a significant sale or initial public offering (IPO) of its global consumer business. The cooperative has also announced that its integrated business units, Fonterra Oceania and Sri Lanka, are part of the divestment plan. This strategic move aims to realize material synergies through expanding the consumer brand portfolio.

According to Rural News, industry expert Montgomerie stated, "We aren't particularly surprised at Fonterra looking to float the consumer business – it has been well flagged in previous communication. This doesn’t necessarily mean we view it as the most likely outcome though. We think an outright sale is more likely."

Fonterra is actively engaging with potential buyers and simultaneously preparing for a potential IPO. To ensure the best outcome for farmer shareholders, the cooperative plans to thoroughly test both the trade sale and IPO terms. If Fonterra opts for the IPO path, Mainland Group has been selected as the corporate brand.

Chair of the Fonterra Co-operative Council, John Stevenson, expressed satisfaction with the divestment update, saying, "We look forward to seeing the outcome of this next stage where the value and terms of both the potential IPO and trade sale are thoroughly tested. It is important to note that farmer shareholders will have to consider and vote on any final outcome."

The news comes as Fonterra farmers are forecast to receive a record milk price of $10.25 per kilogram of milk solids for the season, a factor likely to increase production costs. However, Montgomerie is optimistic that the elevated milk price won't deter potential buyers, despite the pressure it places on margins.

Fonterra anticipates that the divestment will lead to a "significant capital return" to farmer shareholders and unit holders, emphasizing the strategic importance of this initiative.