Fonterra may link with National Foods and Warrnambool Cheese and Butter in a joint bid for Australia's Dairy Farmers, which is valued at up to A$1 billion ($961.5 million), according to Australian media reports.
In an unsourced report, the Australian Financial Review said Dairy Farmers hadconsented to allow Fonterra to enter discussions with National Foods, owned by Japan's Kirin Holdings , and Warrnambool, releasing them from a confidentiality clause imposed on bidders.
Dairy Farmers, which is owned by 2000 farmers and processes one billion litres of milk a year, had been planning to float its manufacturing and marketing division but signalled last year it would look at broader options.
Fonterra had separately sought regulatory clearance to bid, along with Italian dairy group Parmalat, which is eyeing a bid alongside Australian farming cooperative Murray Goulburn.
Other potential suitors include Singapore's Olam International and Canada's Saputo.
In May Fonterra asked the Australian Competition and Consumer Commission to indicate whether it had any concerns that would need to be overcome before a bid was assessed by the board of Dairy Farmers.
A Fonterra spokeswoman said at the time the company was bound by confidentiality and could not comment on the process.
Fonterra earlier this year bought out its major partner in Chilean company Soprole for US$201.9 million ($263 million).
Fonterra was prepared to pay nearly $2 billion for National Foods in 2005 but it was eventually bought by San Miguel.
