Fonterra says NSW court decision will not change sale plans

Fonterra says a NSW court decision will not alter its plans to sell its consumer business. Photo / NZME

Fonterra says plans to divest its global consumer and associated business are unchanged after an Australian court dismissed proceedings after the co-op had sought licensing agreement declarations.

Last November, Fonterra filed proceedings to seek a determination of its rights regarding its licensing agreement with ASX-listed Bega Cheese.

Bega is an Australian diversified food and drinks company with whom Fonterra has long had a commercial relationship.

In its decision today, the New South Wales Supreme Court said it did not have jurisdiction to make the declarations sought.

The court dismissed the proceedings, brought by Fonterra Brands, and ordered Fonterra to pay Bega’s costs.

Fonterra has been making Bega-branded cheese for several years.

Bega itself has expressed a strong interest in picking up Fonterra’s Oceania business, which has Anchor, Mainland, Perfect Italiano, Kapiti, Western Star, and Freshn’ Fruity brands, among others.

Fonterra, commenting on the decision, said: “The co-operative’s clear understanding is that the provisions of its licensing agreement with Bega are not impacted by a divestment process”.

“The court has today decided that it is unable to determine this because there is not yet enough certainty about the outcome of the divestment process.

“This does not change Fonterra’s divestment plans for its global consumer and associated businesses and Fonterra may seek a court determination at a later date,” Fonterra said.

Fonterra had sought declarations from the court to the effect that the transaction proposed by the group does not affect the operation of trademark licence agreements between Bega and the Fonterra companies.

Bega, which is interested in buying Fonterra’s Oceania businesses, said it was pleased with the outcome.

”Bega Group will always fight to protect its rights and we are very pleased with today’s outcome,“ executive chairman Barry Irvin said.

“We hope to work constructively with Fonterra Group on the sale of its Oceania businesses, of which Bega Group is a natural acquirer and remains very interested in,” Irvin said.

Market expectations are for proceeds from the Mainland sale to be around $2.5 billion to $3b.

Australian media have reported private equity firms and strategic suitors lodged bids for Mainland.

The Australian’s DataRoom said bidders included France’s dairy giant Lactalis, advised by Rothschild, and Bega, advised by Kidder Williams.

It said Swiss investment bank UBS could also be jointly advising Bega, which has a market cap of A$1.6b ($1.720b).

The market has speculated that Bega may conduct a capital raise for the acquisition.

The Australian said Pacific Equity Partners had also submitted a bid.

In its last sale update, issued earlier this month, Fonterra said it was actively undertaking a dual-track process, pursuing both a trade sale and initial public offering (IPO) as potential divestment options.

As part of preparing for a potential IPO, the co-op earlier this month named Anne Templeman-Jones as chair-elect of the audit and risk committee for the Mainland Group board.

The appointment follows the co-op’s announcement in March that Elizabeth Coutts had been appointed as chair-elect for the Mainland board.

Fonterra said it continued to progress the trade sale process, including engaging with potential purchasers of the consumer and associated business.

“The co-op advises that it is now at the stage where some potential purchasers may pre-emptively seek regulatory approvals, which is a standard step ahead of any deal being agreed,” it said at the time.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.