Fonterra agrees $3.5b sale of consumer assets to Lactalis
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The news: Dairy group Fonterra has agreed to sell its global consumer and associated businesses to French multinational Lactalis for NZD3.845 billion ($3.5 billion).
The numbers: The company said that there is potential for a further NZD375 million increase from the inclusion of the Bega licences held by Fonterra's Australian business. This would take the headline enterprise value of the deal up to NZD4.22 billion.
The co-operative is targeting a tax-free capital return of NZD2 per share, which is approximately NZD3.2 billion, following completion of the sale.
The context: The divestment, which was cleared by the competition regulator last month, comprises Fonterra's consumer business (excluding greater China) and consumer brands; its integrated Foodservice and Ingredients businesses in Oceania and Sri Lanka; and its 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.
The deal remains subject to certain customary financial adjustments and conditions.
What they said: "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," said Fonterra chairman Peter McBride.
"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."
The source: Fonterra media release
