Fonterra’s move to seek a court ruling on the rights Bega Cheese has in its licensing agreement is understood to have been triggered by prospective buyers wanting clarity on the situation ahead of its asset sale.
The company told the market on Wednesday that it had sought a court determination of its rights regarding its licensing agreement with Bega Cheese by filing proceedings in NSW.
“Fonterra is seeking a court determination to confirm the Co-operative’s clear understanding that the provisions of its licensing agreement with Bega are not impacted by a divestment process,” it said.
Fonterra said it was confident about its legal position and did not expect the matter to disrupt its timeline for a sale.
DataRoom earlier reported that one of the key factors that could weigh in favour of a listing of assets that Fonterra wants to divest is the change of control clause related to the licensing agreement for the use of the Bega brand on dairy products.
Some of the players that have shown an interest have been pressing the company about whether this is an issue in a sale that would give Bega the first option for a purchase.
Strategic players which have so far shown some interest in the Fonterra assets include Lactalis, Friesland Campina and Danone, while private equity firms Kohlberg Kravis Roberts, Permira and Pacific Equity Partners have taken a look.
Asset sales by Fonterra – including its Australian consumer, food service and ingredients business, NZ Fonterra Brands, its global consumer business and Fonterra Sri Lanka – have been well flagged.
The Australian consumer, food service and ingredients business and NZ Fonterra Brands have been renamed Fonterra Oceania. It may be divested next year by way of a $2bn-odd listing if it proves a better option than a trade sale.
Australian and NZ brands on offer include Anchor and Western Star butter and Mainland and Perfect Italiano cheeses.
It has put other non-core assets up for sale in Asia, the Middle East, Africa and the Americas.
Working on Fonterra’s sale plans are JPMorgan, Jarden and Craigs.
Fonterra’s Australian business is less lucrative from an earnings margin perspective than what is on offer from NZ, where the milk supply cost base has been low, say industry sources.
But currently, New Zealand farm gate milk prices are higher than those in Australia, at the $NZ9.50 midpoint compared to $8 in Australia after those across the Tasman last year than those here.
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