Meiji, Friesland Campina, Bega and Lactalis all in hunt for Fonterra Australia assets

Fonterra has a ‘for sale’ sign on its Australian assets. Some of the biggest names in dairy are eyeing off a billion dollar deal.

Japanese food giant Meiji Holdings and Dutch dairy brand Friesland Campina have emerged as possible new contenders eyeing off Fonterra’s Australian assets, joining Lactalis and Bega in the race to snap up the $2bn package.

Lactalis — the world’s largest dairy processor — lodged an application with the Australian Competition and Consumer Commission last month, seeking informal merger clearance before making a formal bid for Fonterra’s assets.

Bega executive chairman Barry Irvin then confirmed to the Australian Securities Exchange that the Australian brand had an eye on Fonterra.

“We hope to work constructively with Fonterra Group on the sale of its Oceania businesses of which Bega Group is a natural acquirer and remains very interested in,” he told the ASX.

Both Meiji and Friesland Campina have been speculated in the financial press regarding a Fonterra manoeuvre but neither have officially confirmed interest.

Bridgecape Commodities director Scott Briggs said it was not surprising Meiji and Friesland Campina were interested in Fonterra’s Australian assets, although no names could be locked down given the clandestine nature of acquisition.

While it was hard to determine who would be the ultimate suitor for the assets, Mr Briggs said a trade sale was more likely than an initial public offering.

“It’s certainly a diverse but attractive set of assets for offshore buyers for a variety of reasons,” he said.

“Food security being a prime reason — Australia’s business stability is very attractive, at a time when there is growing recognition from governments across Asia regarding the nutritional benefits derived from dairy — examples like China’s minimum dairy requirements, Indonesia’s school milk program and Vietnam’s calcium intake recommendations.

“There’s also the trade chain optionality that comes with Fonterra’s Australian assets. An American or European company, for instance, shut-out of a specific market can leverage such an investment to trade into another country unimpeded.”

Bega Cheese executive chairman Barry Irvin. Photo: Robert Hayson

NSW dairy farmer Phil Ryan, who operates a farm in the Bega region and is also a Bega shareholder, said a potential sale of Fonterra’s Australian assets to Bega would be largely welcomed by farmers.

However, he noted it would need to go through ACCC assessment like any other major manufacturer transaction.

“Competition is paramount for Australian dairy farmers — and that would be a concern in some dairy markets about Bega. But it also has a good name among many farmers,” Mr Ryan said.

Australian Dairy Farmers president Ben Bennett said while competition was important, Bega had worked harder than some other processors to foster a harmonious working relationship with primary producers.

“With Fonterra leaving Australia, dairy farmers are left between a rock and a hard place,” Mr Bennett said. “If a multinational swooped in a bought Fonterra’s Australian assets, we’ve seen that movie before and they take a long time getting their head around how the industry works.

“We have a good relationship with Bega, Barry Irvin picks up the phone.

“Yes, competition is important but Bega may be the best option that’s available.”