Background milk
Sell Fonterra Australia or go public?
Dairy giant Fonterra is hesitating whether to sell its Australian dairy division or float it as an independent entity, according to various media in Australia and New Zealand. A sale could raise a fair amount of money for its members, as could an IPO, but it could result in less money coming in, or less money directly.
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Fonterra has been considering divesting its Australian and Sri Lankan businesses for some time, as well as its consumer business in New Zealand. Not everyone at Fonterra is happy about it, but Fonterra is pushing ahead.
Sales proceeds
The intention to divest the Australian branch is something that Fonterra has been thinking about for a long time. The sale could bring in around 2 billion Australian dollars, but according to various reports there are still some hurdles to overcome and things to clarify.
Interested parties
Not that there is a lack of potential interested parties. Dairy giants Lactalis and FrieslandCampina are said to be interested, as are venture capitalists, but they all have their questions. For example, whether Fonterra Australia's licenses can be included in a sale to third parties. Fonterra is also not entirely sure and is therefore trying to obtain clarity through the courts.
Cost price of milk
Another point is the milk price. Farmers in Australia receive a higher milk price than those in New Zealand and that of course has an effect on the yield of the processing, certainly in the case of export. Potential buyers also see that, but somewhere it is also difficult to do something about this. The Australian climate brings with it a higher cost price and that is therefore difficult to change.
Cash and vulnerability
For the New Zealand members, the sale of the Australian branch and the divestment of more parts sounds like good news, because extra cash is welcome, but there are also those who warn that Fonterra is in danger of narrowing down its activities and also making itself more vulnerable, because Fonterra is becoming almost completely dependent on other companies that buy its raw materials. Some even believe that Fonterra is in a sense throwing in the towel by no longer playing in the premier league of high-quality consumer products.