Fonterra to appeal NSW Supreme Court decision on Bega Cheese

Fonterra has a longstanding commercial and distribution agreement with Bega Cheese. Picture / AAP

Fonterra says it will appeal a decision by the New South Wales Supreme Court over the co-op’s licensing arrangements with Bega Cheese.

The court, late last month, said it did not have jurisdiction to make the declarations sought by Fonterra and dismissed the proceedings.

The co-op was ordered to pay Bega’s costs.

Fonterra - which wants to sell its Mainland consumer business - had been seeking a court determination of its rights regarding its licensing agreement with Bega.

“Our clear understanding is that the provisions of our licensing agreement with Bega are not impacted by the proposed divestment process,” Fonterra managing director M&A and strategic divestments, Mike Cronin, said.

“Last week, the court stated it is unable to make a determination at this stage, as there is not yet enough certainty about the outcome of the divestment process.

“Our view has not changed as a result of the court decision and Fonterra intends to appeal this decision in the coming weeks,” Cronin said.

“This does not change our divestment plans, and we continue to pursue both a trade sale and initial public offering [IPO] as a potential divestment option.”

Last November, Fonterra filed proceedings to seek a determination of its rights regarding its licensing agreement with ASX-listed Bega.

Bega - backed by billionaire Andrew Forrest - is an Australian diversified food and drinks company with which Fonterra has long had a commercial relationship.

Bega itself has expressed a strong interest in picking up Fonterra’s Oceania business, which has Anchor, Mainland, Perfect Italiano, Kapiti, Western Star, and Fresh’n Fruity brands, among others.

After last month’s decision from the court, Bega said it was pleased with the outcome.

“Bega Group will always fight to protect its rights and we are very pleased with today’s outcome,” executive chairman Barry Irvin said at the time.

“We hope to work constructively with Fonterra Group on the sale of its Oceania businesses, of which Bega Group is a natural acquirer and remains very interested in,” Irvin said.

Market expectations are for proceeds from the Mainland sale to be around $2.5 billion to $3b.

Australian media have reported private equity firms and strategic suitors have lodged bids for Mainland.

Bega and Lactalis - a French multinational dairy products company owned by the Besnier family - are understood to be contenders for Fonterra’s consumer operations.

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