Phantom bidder calls for investigation into proposed Fonterra acquisition

On 6 July 2012, the Commerce Commission received an application from Fonterra seeking clearance to acquire the dairy processing assets of NZDL – namely its Studholme plant.

In its clearance application, Fonterra claimed that it did not pursue the acquisition.

In a confidential submission relating to Fonterra's application, a rival has claimed to have lodged a better offer than the rumoured successful bid from Fonterra. Despite its higher offer, the firm's bid was not preferred as it would require Overseas Investment Office approval before completion.

The bidder has called on the Commerce Commission to investigate why the Receiver chose not to pursue its more lucrative offer.

Fonterra ‘reluctant bride’​

“The Fonterra offer was clearly not the best offer on the table but the Receiver chose not to pursue other options and yet Fonterra claim not to have pursued the acquisition. This process should be investigated,” ​said the submission document.

“It would be a disappointing situation if this company were to be swallowed up by Fonterra when there are opportunities for it to continue to stand alone and to offer a genuine choice for customers and suppliers alike.”​

“We ask that you critically review the application and find that competition should be allowed to thrive.”​

In its application for clearance, Fonterra claimed it had not pursue the acquisition, instead it called the takeover “the best option” ​for the long term interests of the New Zealand dairy industry.

In its submission, the unsuccessful bidder has questioned why, if Fonterra was a “reluctant bride”​ did the receiver not fully explore its offer.

“[Unnamed bidder] would like to ask the Commission to investigate this claim because the implication is that Fonterra were approached and almost cajoled into buying the company. This suggests that the Receivers may not have conducted a fair process but rather on that was pre-determined in favour of Fonterra despite the presence of higher competing bids,” ​said the document.

“As a bidder who bid [undisclosed amount] the reported purchase price we would ask the Commission to investigate the fairness of the sale process,” ​it added.

Commerce Commission decision​

The submission was made on behalf of the bidding company. The bidder, although unnamed, is involved in dairy farming and processing investment and has a particular interest in New Zealand.

According to the submission document, the bidder has for the “past three years been researching the NZ dairy industry and is very interested to invest.”​

Receivers began listening to offers for the company earlier this year after NZDL’s parent company Nutritek was declared bankrupt in Russia.

Despite the apparent higher bid, NZDL and the receiver entered into an agreement with Fonterra. All conditions of the agreement have been met, with the exception of obtaining clearance from the Commerce Commission.

The Commerce Commission decision is expected on 31 August.