Fonterra boosts dairy powder power with takeover swoop

14-Jun-2012 - Last updated on 15-Jun-2012 at 09:22 GMT

Fonterra has signed a conditional agreement to acquire the milk processing assets of South Canterbury-based New Zealand Dairies (NZDL), and said the dairy site would boost its export capacity, where it is processing around 150m litres of milk per year into powders.

The New Zealand Commerce Commission clearance has yet to rubber-stamp the deal, regarding which the sum is undisclosed.

The Russian-owned facility, which employs around 60 staff, was placed into receivership on 17 May 2012. The receivers, Colin Gower, Stephen Tubbs and Brian Mayo-Smith of BDO Chartered Accountants, called for bids to buy the business and assets of NZDL soon after.

Russian owner Nutritek's parent company, Nutrinvestholding, was declared bankrupt this year, and uncertainty has since shrouded the plant's future; it reportedly had a $100m (€79m) price tag earlier this year, when there were rumours of Chinese interest: Fonterra has not revealed the size of any deal.

In May 2008, baby and specialist food producer Nutritek got the green light to increase its minority stake in NZDL from 5.65% to 100% over a twelve-month period, in what was the first major foreign investment in the New Zealand dairy sector.

New season imminent...

Fonterra said that any deal would mean that NZDL's current farmer suppliers would be paid in full by the receivers, with their milk processed and paid for from the start of the new dairy season, which begins in a few weeks time.

A Fonterra spokesman told DairyReporter.com that there was no timeline for Commerce Commission approval, but that in the meantime the company had agreed with the receiver that it would oversee plant operations throughout the 2012/13 season.

"We're talking to the staff there [at Studholme] and we're discussing options with them over the next few weeks. It's still early days, but we would want to offer employment to as many of the existing staff as possible, provided we get Commerce Commission approval," she added.

No crying over spilt milk

Fonterra CEO Theo Spierings said that the site would complement Fonterra's new Darfield plant (its first in 14 years), which is due to start taking milk in August.

"Our Strategy Refresh has clearly identified the importance of growing milk volumes and optimising our New Zealand manufacturing operations. This transaction helps deliver on that priority," he added.

By taking on plant operations now, Fonterra was able to collect and process farmers' milk from the start of the new season, avoiding the prospect of the latter spilling milk, Spierings said.

"The solution we've developed with the receivers will mean that suppliers who continue to supply NZDL have a tanker coming up their driveway to take their milk and ensures they still have an income," he added.