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Current as of 23/09/14 07:40PM NZST

Fonterra could grab milk plants after Australian deal

By Owen Hembry

Fonterra is in the running to snap up Australian milk processing plants as part of a National Foods deal to buy co-operative Dairy Farmers for A$910 million ($1116 million).

To gain Australian Competition and Consumer Commission approval for the deal, food producer National Foods has agreed to sell milk processing plants, depots and drinking milk distributions contracts in New South Wales and South Australia.

Fonterra has lodged its own interest to buy Dairy Farmers with the Australian commission but withdrew on June 30 - less than a week after it bought the yoghurt and dairy dessert business of Nestle Australia.

Fonterra's Nestle deal included the 28-year right to manufacture, market and sell Nestle brands, including Ski which is under licence to Dairy Farmers but reverts back in 2012.

A Fonterra spokesman yesterday said the company could not comment on the sale process due to confidentiality obligations.

"We aim to be one of the leading consumer dairy products companies in Australia and New Zealand," he said.

"The recent acquisition of Nestle's yoghurt and dairy desserts business, including its Echuca manufacturing site in northern Victoria, represented a significant step towards achieving our growth strategy in Australia."

National Foods spokesman Julian Caples said no company was lined up yet for the divestments.

"We've had some preliminary discussions with Fonterra and others ... but there's another three months to go in the process before the farmer vote [on the sale].

"It's a little premature to start having discussions to try and sell things that you don't own yet."

The sale was subject to court approval and a shareholder vote expected in November.

National Foods would pay $5.65 a share for Dairy Farmers, with an enterprise value of A$910 million - made up of cash and assumed debt.

National Foods is owned by Japan's Kirin Holdings.

- NZ Herald

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