Bega Group is thought to be out in the cold for Fonterra’s $2bn-plus sale process of Mainland Group, and rival Lactalis appears in a stronger position to take control of the dairy brands spin-off.
The Australian Competition and Consumer Commission on Thursday cleared Lactalis to buy the business.
Bega is yet to gain the same clearance and was always thought to face more risks from buying the business when it comes to gaining clearance from the competition watchdog, despite having more synergies.
The other challenge for Bega is that it would likely need to raise equity to buy Mainland Group.
Lactalis and Fonterra both buy raw milk from dairy farmers in Victoria and Tasmania, as well as processing and supplying a range of dairy products across Australia.
But the ACCC said because Fonterra and Lactalis have differing end product mixes, they often sought to acquire milk from farmers with different production profiles, and so were not likely to be each other’s closest competitors.
The French multinational dairy group is working with Rothschild on a deal to buy Mainland Group and is up against other private equity and strategic rivals, including Japan’s Meiji Holdings.
Some close to the process say it has been slow going as it remains thwarted by weaker sharemarket conditions for a float and legal action.
In Australia, Lactalis owns a range of brands such as Pauls, Vaalia, Oak, Président and Lactalis Foodservice.
Fonterra is selling its food services businesses in Australia, New Zealand and the Pacific as well as an ingredients business in New Zealand that generates $200m of annual earnings before interest and tax.
It will see the owner inherit brands like Western Star, Mainland and Perfect Italiano, and certain Bega Cheese products under licence.
It supplies food-service products via the Anchor Food Professionals brand.
Other Fonterra global operations are included in the offering, including those in Asia.
Fonterra is said to be appealing against a court ruling that failed to provide clarity on Bega’s legal rights over its commercial agreement with the New Zealand-based dairy giant to sell products with the Bega brand.
Bega has not been given access to the data room by Fonterra because it refuses to waive its rights.
The sale contest, run by Craigs, Jarden and JPMorgan, is in the early stages of the second round.
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