Dairy giant Fonterra has confirmed it will sell its consumer business, including major brands Anchor and Mainland.
Chief executive Miles Hurrell said it has decided a sale was in the co-operative’s best interests.
“We have been working with our team of advisors to assess potential divestment options, the assets and businesses in scope, and the best pathway to maximise value for our Co-op.”
“This work, coupled with the confidence we have in our revised strategic direction, has confirmed a divestment of our global Consumer and associated businesses is in the best interests of the Co-op,” Hurrell said.
Famous brands attract interest
The sale would include consumer business brands Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and others, which make a range of products, including butter, cheese, and infant formula.
The divestment would also include integrated businesses, Fonterra Oceania and Fonterra Sri Lanka, 17 manufacturing sites around the world, including three in New Zealand.
“We have received meaningful buyer interest in the businesses in scope for divestment, which is testament to their strength and potential, ” Hurrell said.
Fonterra has opted to make ingredients and high value dairy based products for other consumer food makers, which it has said will create a more focused and higher performing business.
Trade sale or share float
Hurrell said it had yet to decide on how to sell the businesses, either through a direct sale to industry players, known as a trade sale, or through an initial public offering (IPO) which would put the assets into a separate company and sell shares in it.
“A final decision on which divestment pathway to pursue will be based on several factors, including which option will result in optimal long-term value for the Co-op.”
Farmer shareholders would vote on the final option for divestment, which would deliver a “significant” capital return to them.
Forsyth Barr investment analyst Matt Montgomerie said the consumer business had been a “problem child” for a long time and its sale made sense.
“Focussing on the core business, where it has delivered more success – particularly China Foodservice – is the right strategy. Selling branded consumer products is not a core strength, as evidenced by its poor performance over a prolonged period.”
He estimated the sale could bring in between $2.5-$3.5 billion.
