August 26, 2008

Fonterra Faces Big Competitor

By JANES, Andrew

New Zealand's Fonterra will face a powerful new competitor across the Tasman with National Foods set to buy Australian co-op Dairy Farmers for $1.1 billion.

After a competitive sales process, Dairy Farmers announced yesterday it would recommend the Kirin- owned National Foods' bid to its farmer shareholders. It will require the approval of at least 75 per cent of its shareholders in a vote in mid-November.

Fonterra pulled out of the race to buy Dairy Farmers in June, shortly after buying Nestle's Australian yoghurt and dairy dessert business.

BusinessDay understands that Fonterra and Dairy Farmers had earlier been in exclusive talks with the aim of combining the two co- operatives.

National Foods has given assurances to the Australian Competition and Consumer Commission that it will sell milk-processing plants in New South Wales and South Australia and license some fresh and flavoured milk brands if successful in acquiring Dairy Farmers.

When Fonterra pulled out of the Dairy Farmers sales process, Dairy Farmers granted it permission to work with National Foods to finalise terms to work together to enhance a National Foods-led bid.

Observers thought this meant Fonterra would be the front-runner to pick up the assets National Foods would need to divest. However, Fonterra looks unlikely to acquire those.


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