Nutricia, which manufactures and markets Karicare brand infant formula in New Zealand, looks set to purchase the infant formula blending, packing and can-forming capabilities of Auckland-based contract manufacturer the Sutton Group.
Through the deal, which is subject to standard regulatory approval, Nutricia will also absorb Gardians, a joint venture between the Sutton Group and investor Grant Paterson that operates a 20,000 tonnes per year milk powder spray drying plant in Balclutha.
“This transaction will provide Nutricia with a large milk drying capacity, along with a long-term fresh milk supply access,” said Nutricia in a statement.
“It will also add an infant formula blending and packing facility to Nutricia’s existing operations platform.”
It added that through the proposed investment, it "not only pursues the development and diversification of its base powder sourcing, but also reinforces its New Zealand heritage.”
Nutricia, which boasts existing manufacturing, distribution and marketing operations near Auckland, did not disclose the price of the proposed acquisition.
It confirmed, however, that it expects to close the deal “in the coming months.”
Commenting on the deal, Brent Sutton, who established the Sutton Group in 1986, said: "Last year we undertook a process to find new capital to grow the business and take it to the next level when we were approached by Danone."
"It is our belief that these family orientated businesses are a great fit and we are excited at the prospects that Danone can provide for the future of Sutton Group and Gardians in New Zealand," he said.
Sutton's partner in the Gardians joint venture, Paterson, added: "We take pride in the Gardians business we have created over the last three years, and I look forward to an ongoing relationship."
Paterson will continue to supply the plants, the statement continued.
The proposed deal has been welcomed by the New Zealand Food and Grocery Council (FGC), which represents the interests of food and beverage manufacturers in the country.
In a statement, Katherine Rich, FGC CEO, said that Nutricia should be "congratulated" for the proposed "simultaneous acquisition."
“This is great news for the industry and for New Zealand’s infant formula manufacturing capacity,” said Rich.
“Having such a renowned multinational company purchasing two New Zealand firms to ensure it has a major infant formula local manufacturing facility affirms once again that New Zealand’s dairy industry remains among the best and safest in the world.”
Last month, the New Zealand revealed that scores of infant formula manufacturers and brand-owners could be temporarily blocked from exporting to China from May 1 under a new raft of regulations.
In a statement issued on 24 April, it was announced that a Chinese audit of 13 New Zealand infant formula manufacturers in March had found that "all but one...have some actions they need to undertake before registration will be complete."
Any infant formula manufacturer or brand-owner in New Zealand hoping to export to China was required to feature on this register by May 1 2014.
The Sutton Group, Gardians, and Nutricia are three of just eight that made it onto the first version of the list.