Fonterra's Chilean unit backs away from Nestle merger

Fonterra Cooperative Group's Chilean subsidiary, Soprole SA, has backed out of a proposed merger with food producer Nestle SA.

Parent companies Fonterra and Nestle agreed to withdraw their application to enter a joint venture between the Fonterra unit and Nestle's Chilean liquid and chilled dairy business, saying the conditions weren't appropriate to proceed.

They said they have no plans to put in a new bid to Chile's authorities, and the antitrust regulator had already flagged it opposed the deal.

"Soprole already has a very strong position in the Chile market and has been posting strong growth in recent years," Fonterra chief executive Andrew Ferrier said in a statement.

"The team is now focused on building on that strong foundation."

Fonterra owns almost all of Soprole, which is Chile's biggest consumer dairy business with about one-third of the market.