KEY POINTS:
Fonterra is boosting its presence across the Tasman by buying the yoghurt and dairy dessert business of Nestle Australia.
The deal, for an undisclosed sum, includes the rights for 28 years to manufacture, market and sell Nestle's brands under licence.
Fonterra said it would be the third largest
player in that segment with a 16 per cent market share when combined with existing brands of Brownes Fresh n' Fruity yoghurt and CalciYum dairy dessert. The acquisition includes Nestle's Echuca factory in Victoria and brands Nestle Diet and All Natural yoghurts, Milo Mousse, Blissful and Munch Bunch.
Fonterra Australia New Zealand managing director John Doumani said the acquisition was a step towards achieving the growth strategy for Australia.
"We currently do not have a national presence in Australia's yoghurt and dairy dessert sector," Doumani said.
"By acquiring Nestle's yoghurt and dairy dessert business, it provides us with a national position and complements our existing portfolio where we hold leading national positions in cheese and spreads through our Mainland, Bega and Western Star brands."
The agreement built on a successful global partnership with Nestle and made good business sense for both parties, he said.
The SKI brand was currently under licence to Dairy Farmers but would revert to Nestle in 2012 at which point it would be licensed to Fonterra.
Fonterra is also looking at buying Australian co-operative Dairy Farmers and has asked the Australian Competition and Consumer Commission to indicate whether it has any concerns that would need to be overcome before a bid was assessed.
Nestle Australia managing director Graham Campbell said the company was committed to being a leading nutrition, health and wellness company and having a big yoghurt and dairy dessert presence in Australia.
"We have a successful track record of marketing through arrangements of this kind, both in Australia and overseas," Campbell said.
"We believe that this new operation creates a soundly based commercial entity that is well placed to be one of the leaders in the yoghurt and dairy dessert sector, and we are delighted that the vast majority of employees will be moving across to Fonterra."
The agreement will become effective on September 1.
Meanwhile, Fonterra is also planning a new chilled dairy products plant in northeast Brazil.
The factory would be built by Dairy Partners America - Fonterra's joint venture with Nestle - in the state of Bahia at Nestle's Feria de Santa site.
The factory was expected to be commissioned by the end of the year, with a total investment of about US$30 million ($39.6 million).
This included some investment by Nestle Brazil in addition to the cost of the plant.
Dairy Partners chief executive Juan Carlos Pestana said the plant would help tap a growing appetite for fresh and cultured produce.
A Fonterra spokeswoman said Latin America was one of the largest and fastest growing markets for consumer dairy products.
"Demand for fresh milk and chilled dairy products is growing at about 3 per cent per annum."
The northeast region of Brazil has a population of about 50 million and accounted for about US$380 million, or 20 per cent, of the country's chilled dairy market.
TIME FOR DESSERT
* Fonterra is buying Nestle Australia's yoghurt and dairy dessert business.
* Combined with existing brands, Fonterra will have a 16 per cent share of the sector in Australia.
* Nestle says the new operation is well placed to become a market leader.