Nearly 89% of Fonterra shareholders voted in favor of the transaction, which is expected to complete in the first half of calendar 2026 pending regulatory approvals.
Fonterra is likely to net more than NZ$4bn after settlement costs, with shareholders down to receive NZ$2.00 per share or NZ$3.2bn in total tax-free cash return.
Chairman Peter McBride said: “We’re pleased to have received a strong mandate, with 88.47% of the total farmer votes cast in support of the recommendation and 80.59% participation based on milk solids voted. We want to thank all farmer shareholders who voted.”
With an offer of NZ$4.22bn in total, Lactalis was the highest bidder for Mainland Group, which comprised Fonterra’s for-sale global consumer business (excluding Greater China) plus parts of its APAC and MEA ingredients and foodservice portfolio.
It followed a competitive tender process that explored both a trade sale and an IPO and emerged as the best-value proposition for the co-op in both financial and operational terms.
The divestment all but completes Fonterra’s strategic pivot to B2B, with the co-op keen to focus on its high-performing Ingredients and Foodservice businesses going forward. Those two business divisions generated NZ$21.3bn in FY2023 for the co-op compared to Consumer’s NZ$3.3bn. Around 80% of Fonterra’s milk goes into Ingredients, with just 15% into consumer products.
“We have examined the strategic context we operate in, our strengths and how as a co-op we create value for our farmer owners,” said McBride.
“The divestment will usher in an exciting new phase for the co-op. We will be able to focus Fonterra’s energy and efforts on where we do our best work. We will have a simplified and more focused business, the value of which cannot be overstated.”
What does the deal include?
If regulatory approvals are secured and the deal officially goes through, Lactalis will acquire Fonterra’s:
- Ingredients, consumer and foodservice businesses in Australia
- Consumer and foodservice businesses in New Zealand
- Consumer and foodservice businesses in Sri-Lanka
- Consumer and foodservice businesses in the Middle East and Africa, and
- export business in the Pacific and Caribbean.
This means that brands such as Anchor, Mainland, Western Star, Perfect Italiano, plus the licensing rights to the Bega cheese brand, will pass over to Lactalis.
Fonterra will continue to provide milk for these brands through a commercial supply partnership with Lactalis, making the French multi-national one Fonterra’s largest customers.
What isn’t included in the deal is Fonterra’s Greater China consumer business, which the co-op retains and where it sees significant growth potential.
But going forward, the focus will be on B2B and turning New Zealand farmers’ raw milk supply into high-returning products via Fonterra’s Ingredients and Foodservice businesses.
Shedding Mainland Group would also bolster the other two divisions and enable Fonterra to become more profitable.
The businesses grouped under Mainland Group represented poor ROI compared to the Ingredients and Foodservice arms, according to Northington Partners, the independent corporate advisors who advised Fonterra on the deal’s merit ahead of the shareholder vote.
Northington noted that if Fonterra had invested the capital it pooled into Mainland Group into its Ingredients and Foodservice businesses instead – and achieved the same returns – the co-op’s EBIT could have been around NZ$200m higher in FY24 and ~$110m higher in FY25.
What regulatory approvals need to be secured?
The deal has been approved by the two companies’ boards and shareholders but it won’t be official until regulatory approvals are secured.
Eight anti-trust bodies need to have their say across the following jurisdictions:
- New Zealand’s Overseas Investment Office (OIO)
- Australia’s Foreign Investment Review Board (FIRB)
- COMESA (competition approval in East Africa)
- French Polynesia
- Kuwait
- Vietnam
- Saudi Arabia
- New Caledonia
If there are no delays or other hold-ups with regulators and the businesses’ structural separation goes as planned, the deal is expected to settle within the first half of 2026.
