Fonterra Sells Consumer Business to Lactalis for $3.845 Billion
The family-owned business Lactalis will pay $3.845 billion to acquire several assets from Fonterra, contingent upon certain financial adjustments and conditions. These include getting approval from farmer shareholders and securing final regulatory approvals. Once approved, this transaction marks a significant shift in Fonterra's business model.
The sale encompasses Fonterra's global Consumer business, excluding Greater China, as well as Consumer brands. It also includes the integrated Foodservice and Ingredients businesses across Oceania and Sri Lanka, and the Foodservice business in the Middle East and Africa.
Beyond the base enterprise value, there is potential to push the total value to $4.220 billion with an additional $375 million linked to the Bega licences currently held by Fonterra's Australian business. Fonterra plans to return approximately $3.2 billion to its farmer shareholders and unit holders through a tax-free capital return of $2/share after the completion of the sale.
In an agreement with Lactalis, Fonterra will continue to supply milk and other products to the sold businesses, ensuring that New Zealand farmers' milk remains in popular brands such as Anchor and Mainland. This enduring supply arrangement is critical for the continuity of Fonterra's association with these iconic dairy brands.
Fonterra chairman Peter McBride highlighted that after a rigorous 15-month evaluation of sale and IPO options, selling to Lactalis was deemed the most valuable route for long-term benefits. "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," he said.
Lactalis's bid allows for a full divestment and a more rapid return of capital to Fonterra’s owners compared to an IPO, aligning with Fonterra's long-term strategy. This confidence in the strategic direction led the board to recommend shareholder approval of the divestment.
