Bega has informed the Australian Competition and Consumer Commission (ACCC) of its intention to lodge an informal merger clearance for the potential acquisition of Fonterra Oceania. Bega says it is the “natural acquirer”, and the acquisition would benefit the company, dairy industry, and consumers.
Last year, Fonterra Co-operative Group announced the sale of its global Consumer business, Fonterra Oceania, and Fonterra Sri Lanka. In March, it said the combined financial profile would be called Mainland Group.
In Australia, Fonterra sources raw milk from around 650 farmers in Victoria, Tasmania, and parts of South Australia and New South Wales to processes into a range of dairy products as part of its ingredients, consumer and food service businesses.
Its brands include Mainland, Western Star and Perfect Italiano, and it also holds the licence to the Bega brand for natural and processed cheddar cheese products in Australia.
In May, the Supreme Court of New South Wales dismissed Fonterra’s case regarding trademark licensing agreements with Bega and its divestment plans. Fonterra wanted certainty its divestment plan would not affect existing trademark licence agreements with Bega, or trigger “change of control” clauses in the agreements.
Fonterra has licensed the Bega Cheese brand since 2001, and its products account for six per cent of total Mainland Group revenue. Fonterra’s concern is that if there is a risk the buyer cannot use the trademarks, the likely price of the sale would be jeopardised.
Bega joins French global dairy business Lactalis in lodging its interest, pointing out that because it is an Australian company it wouldn’t require Foreign Investment Review Board approval.
If Bega acquired the business, it said it would “significantly enhance” outcomes for the company and the dairy industry.
Lactalis is headquartered in Laval, France. In Australia, it has roughly 500 farmer-suppliers across New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia. Lactalis processes raw milk into dairy products such as fresh milk, cheeses, chilled yellow spreads and yoghurts, as well as dairy ingredients such as milk powders. It supplies products to retail and food services businesses through brands such as Pauls, Vaalia and Kraft.
Mainland Group is valued at as much as $4 billion. As well as Lactalis, multinational FrieslandCampina, and the US private equity firm, Warburg Pincus are also said to be considering a bid.
