Fonterra's revelation that it may form a joint venture with French-owned multinational Yoplait - if it gets National Foods - has analysts concerned that its takeover costs will be greater than this week's revised bid suggests.
On Wednesday, Fonterra upped its offer for Australian dairy company National Foods by more than $200 million - raising its bid from A$5.45 to A$6.20 a share.
The joint-venture company - which would manage yoghurt and dairy food brands on both sides of the Tasman - has been floated to shore up Yoplait distribution for National Foods, if Fonterra gets total control.
National Foods already has the licence to distribute the Yoplait brand in Australasia - a vital part of its business - but the French company has the right to revoke it in the event of an ownership change.
Having recognised the strategic value of the licence in the takeover play, Yoplait asked Fonterra to negotiate a new deal.
Some say the joint venture agreement indicates Yoplait drove a hard bargain. They say it can be interpreted as a significant extra cost to Fonterra as its seeks to earn a profit on its costly Australian investment.
Fonterra strategy director Graham Stuart accepts that there are costs to the Yoplait deal, but also strategic upsides to working with Yoplait that will allow a joint venture to "confer benefits beyond what we would be able to achieve with the current arrangement".
He said Yoplait had a lot of expertise it had been unable to apply to the Australasian market under the existing licensing arrangement. "They see in Fonterra a partner that is going to be more accommodating in allowing them to have an active role in the management of their brands."
Fonterra is no stranger to joint ventures - it runs its South American operation in partnership with Swiss giant Nestle.
Stuart said it was too early to talk about details of any partnership. But the revised bid did not take Fonterra outside the original criteria it set for making the deal work.
He said farmers' payouts would not be affected by the deal. Yoplait has agreed to let National Foods keep the licence if Fonterra takes only majority control.
Cash cow
* Yoplait is a subsidiary of French-farmer-owned co-operative Sodima.
* It is the world's second-biggest brand in fresh dairy products.
* It is sold in more than 50 countries.
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