Paravicini says: "We've always been clear to the market that whenever possible, if needed, we would not shy away from doing a major transaction on an M&A basis to support our ongoing financial strategy."
Fonterra's move didn't stop Standard & Poor's from downgrading its long-term credit rating from A plus to A. S&P said that the equity investment in Beingmate was evidence of a risk appetite that was "higher than our previous expectations".
This tends to suggest that Fonterra has some work to do to condition the ratings agencies to its strategy.
For his part, Paravicini says it's all part of an ongoing effort to reduce Fonterra's exposure to asset volatility, while catering for increased capacity and downstream investment.
As part of the deal, a new joint venture between Beingmate and Fonterra will be formed which will purchase the Darnum plant in Australia from Fonterra.
It's Fonterra's first major partnership in China since the disastrous Sanlu venture which failed amid the tainted milk scandal in 2008.
Beingmate will retain a 51 per cent stake in the new venture to satisfy the regulatory requirements imposed by the Chinese Government under its new mandate to consolidate the national dairy industry and raise the standard of domestic product.
A crackdown on cowboys in the Chinese infant formula market now means that all domestic producers must maintain full control over their supply chain.
Paravicini says that the deal meets the regulatory requirements from a "technical point of view", although Fonterra will maintain day-to-day control of the plant's operations.
While being unable to disclose any specific details, Paravicini says there are a number of clauses in the joint-venture agreement which will protect Fonterra from undue risk although it is in the minority position.
"This is about a plan to maximise the capacity available at Darnum," he said. "We will retain the operations and it ensures that should the deal go backwards, that asset will remain under the control of Fonterra."
The key point is that Beingmate will provide an extensive distribution and sales network for Fonterra, giving it direct access to the Chinese infant formula market. What must have been particularly appealing to Fonterra is Beingmate's expertise in tier 2 and 3 cities - a market Fonterra has yet to make a big impact on as its existing focus has been on the high value tier 1 cities.
The deal will see Anmum exclusively licensed to Beingmate in China, with Fonterra earning a royalty fee from sales - a move that will take some of the execution risk away from Fonterra compared with its previous stand-alone strategy.
Under the terms of the new partnership, Fonterra is expected to increase turnover of the Anmum brand as high as $200 million over the next three to four years, once the Darnum plant is operating at full capacity.
The devil is in the detail, but partnering with the business which controls the largest share of the local Chinese infant-formula market is a huge step forward in Fonterra's quest to move up the value chain in China.
• Fran O'Sullivan is a business columnist for the NZ Herald and Alexander Speirs (right) is a business journalist for Herald Business Reports
