Big financial windfall for NZ dairy farmers gets closer as Fonterra moves toward the final stages of selling some of its household brand names such as Anchor and Mainland

French dairy giant Lactalis is now apparently in exclusive negotiations to buy Fonterra's global consumer businesses, including household name brands such as Anchor and Mainland.

The Australian Financial Review's Street Talk column, which has a longstanding reputation for getting the inside breaks on big corporate deals, reports that Lactalis has been in competition to buy the businesses with Japan’s Meiji and ASX-listed Bega Group, which owns the Dairy Farmers, Dare, Yoplait and Farmers Union brands. 

But now, Lactalis has gone into exclusive negotiations, giving it the chance to cut a deal.

This follows on from news last month that the Australian Competition and Consumer Commission (ACCC) had cleared Lactalis to buy the Fonterra consumer business after deciding it didn't have competition concerns regarding the operations of the businesses in Australia.

Lactalis, styled as the world's biggest dairy company (with revenues of €28.3 billion) is on the acquisition trail and recently completed a US$1.2 billion acquisition of yoghurt businesses in the United States.

Fonterra has been running a 'dual-track' sales process for the businesses, which have been named Mainland Group and is seeking to sell them either as a trade sale or through an initial public offering (IPO) and stock market listing of the shares.

What the news about Lactalis going into exclusive negotiations to buy the businesses means is that the NZX and Kiwi investors will miss out on the chance to buy a slab of Mainland.

Early indications - though not from Fonterra itself - were that Fonterra's shareholder farmers may get a windfall of as much as $3 billion for a total sale of the assets. 

Fonterra itself has said only that it "continues to target a significant capital return to be made to farmer shareholders and unit holders following the divestment".

A 'roadshow' was undertaken earlier this year to highlight the for-sale assets to investors. 

The roadshow materials showed the assets up for sale made revenues of $4.9 billion in the 2024 financial year, up from $4.7 billion the year before. Earnings before interest and tax (EBIT) were $200 million in the 2024 financial year.

Lactalis is a French multinational dairy group based in Laval, France. Lactalis business activities include acquiring raw milk from farmers and processing it into dairy products and ingredients for domestic consumption and export. In Australia, it owns a range of brands such as Pauls, Vaalia, Oak, Président and Lactalis Foodservice.