Dairy cooperative Fonterra has agreed to sell its consumer businesses to global dairy giant Lactalis for $3.845 billion.
The businesses being sold include major brands such as Mainland, Anchor and also processing operations in Australia and Sri Lanka.
The sale to the French-based dairy company included a long-term agreement for Fonterra to sell milk and ingredients to Lactalis.
"As the world's largest dairy company, Lactalis has the scale required to take these brands and businesses to the next level," Fonterra chief executive Miles Hurrell said.
"Fonterra farmers will continue to benefit from their success, with Lactalis to become one of our most significant Ingredients customers."
Lactalis chief executive Emmanuel Besnier said the consumer businesses would strengthen its growth strategy across Oceania, Southeast Asia and the Middle East.
Fonterra chairman Peter McBride (left) and Fonterra chief executive Miles Hurrell. Photo: RNZ/Marika Khabazi
"Combining the Fonterra consumer business operations and market leading brands with our existing footprint in Australia and Asia will allow Lactalis to further grow its position in key markets," Besnier said
The sale included Fonterra's global Consumer business, excluding Greater China, and its consumer brands, as well as the integrated Foodservice and Ingredients businesses in Oceania and Sri Lanka, and Foodservice business in the Middle East and Africa Foodservice business.
In addition to the base value of $3.845b, there was potential for a further $375 million increase from the inclusion of the Bega licences held by Fonterra's Australian business, which if progressed would take the headline value of the transaction to $4.22b.
The Co-op was targeting a tax-free capital return of $2.00 per share, which was about $3.2b, following completion of the sale.
The deal was expected to settle in the first half of 2026, subject to a number of conditions, including regulatory and shareholder approvals.
Fonterra said shareholders will be asked to approve the deal at special meeting to be held in late October or early November.
Fonterra chairman Peter McBride said the deal needs a 51 percent vote from farmer shareholders to go ahead but the company is seeking a stronger mandate than that.
Speaking just hours after the sale agreement, McBride said it was a significant deal for farmers and regional New Zealand.
Fonterra would begin speaking to shareholders and holding webinars to explain the deal from next week.
McBride said many farmers would have mixed feelings, having helped build brands like Anchor and Mainland, but he believed the majority would support the deal.
"Farmers have been required to put capital into Fonterra over time. We are returning some of that capital to them.
"It is important for regional New Zealand; that money will be invested back into regional New Zealand. Some farmers may retire debt.
"It has been a long journey for Fonterra shareholders. It is about giving them back some of the commitments they have made to the company over a long time, so it is significant for farmers."
A Bay of Plenty dairy farmer was willing to let Fonterra bosses like Hurrell and the board take the lead on selling the co-op's consumer businesses.
Bill Young and fellow sharemilkers farm 330 cows south of Rotorua, supplying Fonterra.
He said there were two sides to the proposal - one was that it was strange to cut businesses that add value, rather than stay commodity-reliant as New Zealand was often criticised for in forestry
But on the other hand, Young said Hurrell was doing a good job at turning the co-op around, and if he didn't see the businesses as profitable or in Fonterra's best interests, he trusted his judgement.
Sale could put money in Kiwi farmers' pockets
The sale of Fonterra's consumer business to global dairy giant Lactalis could put hundreds of thousands of dollars into Kiwi farmers' pockets.
Tihoi dairy farmer Richard Webber told RNZ that for a global company to place such value on Fonterra's consumers brands, was good news.
"It's got to be a win-win for us," he said.
Once the sale is completed Fonterra shareholders will get a $2 a share tax-free payout. Richard said even for a smaller farm producing 100,000 milk solids a year, that was a big cheque.
"So there's $200,000 for a farmer who is producing 100,000 milk solids, that's a three or four hundred cow farm, that's a significant amount of money and it's going to flow through the national economy.
"It's got to be good for New Zealand," he said.
However, it's not a done deal as Fonterra needs 51 percent of its shareholders to vote in favour for it to go through.
"At the end of the day, the farmers having the final say really highlights the value of the co-operative and there's been really good robust discussions about it for at least the last 18 months.
"Obviously it's attractive to a lot of other companies, so that in itself should be quite flattering to all of us involved in Fonterra," Webber said.
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