Lactalis taps Rothschild for Fonterra asset sale

Fonterra is selling valuable dairy brands through three investment banks. Picture: iStock

Global dairy giant Lactalis has hired investment bank Rothschild in its quest to gain control of Fonterra’s valuable portfolio of dairy assets on offer worth well over $2bn.

It comes as New Zealand’s Fonterra, which is listed in Australia, told the market on Wednesday that it had launched its asset sale process, confirming DataRoom’s earlier report that parties were signing up to receive confidential documents as part of an information memorandum.

Other suitors around the hoop are Bega, advised by Kidder Williams, which is in search of a joint venture partner as part of its quest to buy the Australia and New Zealand business, and it would require a large capital raising to carry out a deal.

Canada’s Saputo is undertaking a large amount of work on the business, but faces strong obstacles when it comes to gaining clearance from the Australian Competition and Consumer Commission, and also has faced challenges with its own Australian operations.

When Fonterra was earmarked for a listing in 2021, Pacific Equity Partners raised the prospect of owning a stake in the Australia and New Zealand operation, and would likely line up again.

European private equity firm CVC has been interested, as has PAI, which purchased Fonterra’s Tip Top ice cream brand for its Froneri ice cream business that is said to be performing strongly.

Friesland Campina is also keen to buy Fonterra assets in conjunction with a partner.

A Chinese private equity firm is also around the hoop, although would be unlikely able to buy the asset from a regulatory perspective.

Danone is also expected to take a look.

The understanding is about 30 parties have lodged expressions of interest in the hope of gaining an information memorandum.

Fonterra told the market on Wednesday that it had branded its Australia and New Zealand food service and ingredients business that is for sale Mainland Group, which would be subject to a dual track process, testing interest for a sale or initial public offering.

Mainland would be run by Rene Dedoncker, Fonterra’s Managing Director Global Markets Consumer and Foodservices, and the chief financial officer would be Paul Victor, the former Incitec Pivot CFO.

Mainland Group is estimated to be worth about $2bn.

Working on the asset sales are investment banks including Craigs, Jarden and JPMorgan, and first round bids are due at the end of March.

As well as Mainland Group, which includes iconic brands such as Anchor and Western Star butter, and Mainland and Perfect Italiano cheese, Fonterra is selling other non-core assets in Asia, China, the Middle East, Africa and the Americas.

Fonterra has been seeking legal advice on a change of control clause on the Bega brand of products for Mainland Group, and clarity around Bega’s rights from a legal perspective is expected shortly.