Lactalis is set to acquire Fonterra’s consumer and associated businesses after agreeing a deal for NZ$3.845bn (US$2.23bn in current currency).
The total amount could rise by NZ$375m to NZ$4.2bn (US$2.44bn) from the inclusion of the Bega cheese manufacturing licences held by Fonterra’s Australian business.
Lactalis’ offer was ‘the highest value option’ according to Fonterra chairman Peter McBride. The New Zealand dairy co-op had multiple bidders for the business, known collectively as Mainland Group and comprising Fonterra’s global Consumer business (excluding Greater China) and Consumer brands; the integrated Foodservice and Ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business.
As part of the sale agreement, Fonterra will continue to supply milk and other products to the divested businesses, meaning that New Zealand farmers’ milk will still be used for Anchor and Mainland-branded goods.
The sale is still subject to regulatory approvals from the Overseas Investment Office in New Zealand, the Foreign Investment Review Board in Australia, as well as relevant competition regulators and foreign direct investment regulators in certain countries including Kuwait, New Caledonia and Saudi Arabia. Lactalis already secured informal clearance from the Australian competition authority this summer.
Fonterra is targeting a tax-free capital return of NZ$2.00 dollars per share, or around NZ$3.2bn on completion, which is expected to happen in H1 2026. A farmer shareholder vote is set to be held at a Special Meeting to be held in late October or early November.
Lactalis CEO Emmanuel Besnier said: “With this acquisition, we significantly strengthen our strategy across Oceania, Southeast Asia and the Middle East.
“Combining the Fonterra consumer business operations and market leading brands with our existing footprint in Australia and Asia will allow Lactalis to further grow its position in key markets. I’m delighted to become a key partner to Fonterra over the long term as well as I’m looking forward to welcoming new teams to the Lactalis family.”
McBride commented: “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.
“Alongside a strong valuation for the businesses being divested, the sale allows for a full divestment of the assets by Fonterra, and a faster return of capital to the co-op’s owners, when compared with an IPO.
“This, coupled with the firm belief we have in Fonterra’s long-term strategy, gives the Board the confidence to unanimously recommend this divestment to shareholders for approval.”
Fonterra CEO Miles Hurrell added: “As the world’s largest dairy company, Lactalis has the scale required to take these brands and businesses to the next level. Fonterra farmers will continue to benefit from their success, with Lactalis to become one of our most significant Ingredients customers.
“At the same time, a divestment of these businesses will allow Fonterra to deliver further value for farmer shareholders and New Zealand by focusing on our world leading Ingredients and Foodservice businesses, through which we sell innovative products to more than 100 countries around the world, from our home base here in New Zealand.”
Hurrell added that the targets and policy settings Fonterra released alongside its strategy in September 2024, including an average Return on Capital of 10-12%, remain achievable if the divestment progresses.
“Fonterra’s previously announced FY25 earnings guidance of 65-75 cents per share remains unchanged and our FY26 earnings guidance will be announced as part of the FY25 Annual Results in September 2025.
“The Co-op expects its FY26 earnings per share to be presented on a continuing operations basis and exclude the performance of the Consumer and associated businesses during the pre-completion period.”
This is a developing story and may be updated at a later stage.