Fonterra's RD1 in trans-Tasman deal

One of New Zealand's biggest rural service companies, RD1, plans to expand its operations in New Zealand as part of a trans-Tasman deal between its parent, Fonterra, and the Australian Wheat Board, now known as AWB Ltd.

At the same time, Fonterra will get its foot in the door of the rural services sector across the Tasman.

AWB's rural services business Landmark will make a net $35 million to $45 million investment in the deal, forming a 50:50 joint venture in New Zealand, and a strategic "dairy alliance" in Australia, Fonterra and Landmark said in a joint statement.

Fonterra's RD1 business operates a network of 51 retail stores in New Zealand offering supplies to dairy farmers, while Landmark has 430 stores in Australia offering services to agribusinesses.

In New Zealand, Fonterra's RD1 stores will use Landmark's expertise in finance, insurance, real estate, livestock sales to expand the services available to farmers.

The RD1 stores will break out of targeting mainly the dairy sector to compete with companies such as PGG Wrightson -- effectively controlled by former Fonterra chief executive Craig Norgate.

RD1 will introduce products and services catering to the beef, sheep and cropping sectors.

RD1 will also gradually expand its network of stores in the South Island, where Wrightson last year merged with Pyne Gould Guinness.

In Australia, the dairy alliance between the two companies will use Fonterra's experience to expand Landmark's products and services to the Australian dairy sector -- and it will also gain access to Fonterra's 2000 farmer suppliers on that side of the Tasman.

Initially the Alliance will involve 11 Landmark stores in Victoria, which will be co-branded Landmark Fonterra -- with the two companies splitting the profits -- , with plans to gradually increase the number of stores across Australia in the future.

The deal will enable Landmark to gain a foothold in the Australian dairy sector, which it has identified as an important growth opportunity, and give it access to a national network in New Zealand.

The operations in both countries will be governed by a joint board with representatives from both companies, and Fonterra said today the deal will support both companies' growth strategies and underline a commitment to invest in the dairy sector.

RD1 chief executive John Lea and general manager of Landmark's sales and operations Michael Thomas said the arrangements will take advantage of the companies' complementary strengths.

Mr Lea said the companies had a combined procurement base of over $2 billion, and Fonterra's general manager of milk supply in Australia, Steve Nelson, said the dairy alliance was both a natural fit with Fonterra's increasingly Australasian home base.

- NZPA