More than a year after Fonterra Co-operative Group raised the prospect of divesting its global Consumer and associated businesses, it has agreed to sell it to global French dairy giant, Lactalis, for AU$3.479 billion (NZ$3.845 billion).
There is also potential for an extra $339 million (NZ$375 million) from the Bega licences held by Fonterra’s Australian business.
The sale includes 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.
Fonterra CEO Mike Hurrell said that Lactalis – as the largest dairy company in the world – had the scale to take the 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 said.
Before its completion, there are customary financial adjustments and conditions required – approval by farmer shareholders, separating the businesses from Fonterra, and receipt of certain final regulatory approvals.
Hurrell said the co-op’s FY25 earnings guidance of 65-75 cents per share remained unchanged. The co-op is targeting a tax-free capital return of NZ$2.00 dollars per share, which is approximately NZ$3.2 billion, following completion of the sale.
As part of the sale agreement, Fonterra will continue to supply milk and other products to the divested businesses
Fonterra chair Peter McBride said over the last 15 months, the board has thoroughly tested the terms and value of both a trade sale and initial public offering (IPO) as divestment options.
In February 2024, Fonterra merged its Australian and New Zealand businesses into Fonterra Oceania. Three months later, Hurrell announced a “step-change” for the business to focus on becoming a global B2B dairy nutrition provider. As a result, it would divest some or all of its global consumer business – including Fonterra Oceania.
In February, Hurrell said group was considering either a sale or initial public offering (IPO) and announced a rebranding of the consumer business to Mainland Group. Its MD Global Markets Consumer and Foodservice, René Dedoncker, was named CEO-elect. Dedoncker led the Australian business from 2017 and through the merger.
And in March the roadshow got underway.
McBride said the sales process had been “highly competitive with multiple interested bidders”, and the board was confident Lactalis was 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,” McBride said.
Lactalis submitted an informal clearance to bid with the Australian Competition & Consumer Commission (ACCC), which announced in July it wouldn’t oppose Lactalis’ proposed acquisition of Fonterra’s consumer and food service businesses, if the bid went ahead. While it would see two of the largest buyers of raw milk combine, the ACCC says it is “unlikely” to result in a lessening of competition.
Lactalis CEO, Emmanuel Besnier, said the acquisition would “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,” Besnier said.
Fonterra received financial advice from Jarden, Craigs Investment Partners and JP Morgan; and legal advice from Russell McVeagh and Herbert Smith Freehills Kramer.
Fonterra’s previously announced FY25 earnings guidance of 65-75 cents per share remains unchanged and its 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,” Hurrell said.
With the Special Meeting to occur in late October or early November, Fonterra has deferred its Annual Meeting from November 2025 to December 2025. A date for the Annual Meeting will be announced in due course.
