Richard Inder: Hart's skill as deal-maker brings him cash and top brands

Graeme Hart's asset swap with Fonterra is not the transaction he hoped for, but it still underscores his reputation as one New Zealand's most astute deal-makers.

He wanted to sell New Zealand Dairy Foods outright and was aiming for around $1 billion. That price was clearly too rich for the suitors - Philippines brewer San Miguel and possibly the European food giants Nestle and Danone.

A Hart spokesman says that this latest deal, made up of a mixture of assets and $338 million cash, also fails to value the Dairy Foods assets at the $1 billion he hoped for.

No matter. The bald fact is this: a business Hart acquired in 2002 for $310 million is now worth well over $754 million. Fonterra does not come out of the deal so well.

The co-operative sold Hart a majority stake in Dairy Foods after its creation from the merger of New Zealand Dairy Group, the Kiwi Dairy Co-operative and the New Zealand Dairy Board.

Yesterday's asset swap amounts to Fonterra admitting that keeping Dairy Foods' assets would have been the best move.

Yoghurt and cultured foods are the key growth opportunity in New Zealand and abroad, but Dairy Foods owned the market leaders - Fresh'n Fruity and Country Goodness.

The sale of Dairy Foods also stripped Fonterra of a key asset - the Anchor brand - in its home market.

(The rationale, however, for buying back the Anchor brand here is largely emotional. New Zealand is not an economically important market to Fonterra and therefore any cost savings are likely to be minor.)

It is certainly true that Fonterra would have found engineering a split of Dairy Foods in the manner of yesterday's deal difficult at the time of the merger. It would have involved a messy and time-consuming stockmarket takeover. Fonterra inherited just over 50 per cent of the shares. The rest had been distributed among Dairy Group shareholders in 1999 to facilitate a tie-up with a South Island co-operative.

Meanwhile, the Commerce Commission had given Fonterra a limited time to resolve concerns about the co-operative's dominance of the local consumer dairy market.

The choice of which local consumer business to bring into the fold - Dairy Foods or the Kiwi-owned Mainland - was also just one of a number of decisions the dairy giant's executives faced.

Still Fonterra's 12,000 farmer shareholders would be right to ask how so much value slipped through their fingers.

They can now only hope that Hart does not see the same potential in the Meadow Fresh and Tararua brands he has acquired.