French food giant Danone has entered an agreement to buy New Zealand dairy processing firms Sutton Group and Gardians.

News of the deal comes as this country's dairy industry negotiates a raft of new Chinese infant formula regulations, which come into force tomorrow.

Auckland's Sutton Group is best known for infant formula contract manufacturing, while Gardians - a joint venture with Sutton - operates a milk powder spray drying plant in Balclutha, Otago.

Danone's purchase price has not been disclosed. The French firm is the parent company of infant formula maker Nutricia, which operates a factory in Auckland's Mt Wellington.


"Last year we undertook a process to find new capital to grow the business and take it to the next level when we were approached by Danone," said Sutton co-founder Brent Sutton.

"It is our belief that these family orientated businesses are a great fit and we are excited at the prospects that Danone can provide for the future of Sutton Group and Gardians in New Zealand."

The deal is subject to regulatory approval.

Danone is suing New Zealand dairy cooperative Fonterra over lost sales and other costs it claims resulted from last year's botulism scare.