Fonterra settles with Bega, takes price for Mainland sale to $4.22b

Fonterra says it has settled a licence dispute with one of its biggest customers in Australia, Bega Cheese.

The settlement means the purchase price payable by France’s Lactalis for Fonterra’s consumer businesses - announced last week - will go from $3.845 billion to $4.22b.

“Bega agrees that the structure of the sale to Lactalis of Fonterra’s global consumer and associated businesses does not constitute a change of control under the Bega licences,” the co-op said.

“As a result, the Bega licences held by Fonterra’s Australian business will be included in the divestment.”

As previously announced, Lactalis will pay Fonterra $375 million for the Bega licences in addition to the $3.845b base enterprise value, bringing the total proceeds for the sale of the consumer and associated businesses to $4.22b.

Fonterra has agreed to pay Bega’s legal costs to resolve the dispute.

Last week, Fonterra’s chief executive Miles Hurrell said an initial public offering for the co-op’s consumer business was a live option until he signed off on its outright sale to Lactalis.

The purchase price was well over market expectations and will count as one of New Zealand’s biggest corporate transactions.

The sale comprised Fonterra’s global consumer business (excluding Greater China) and consumer brands; the integrated foodservice and ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa foodservice business.

Hurrell said the sale process attracted widespread interest.

“We can’t get into who the parties were, but I think that the value that has come through suggests that it was a very competitive and contestable process,” he told a news conference at the time.

He said an initial public offer (IPO) option was “on the table” right up until the deal with Lactalis was signed.

Market analysts have said a trade sale was the most likely outcome.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.