Members of New Zealand dairy co-op Fonterra are due to vote next month on the sale of its global consumer arm, Mainland Group, to French multinational Lactalis.
The co-op, which holds an online special meeting on the sale on 19 February, is targeting a tax-free capital return of NZ$2 per share to shareholders and unit holders, equivalent to around $3.2bn, once the sale is complete.
The deal remains subject to certain regulatory approvals and the separation of the business from Fonterra. The co-op has confirmed that Lactalis has received approval from Australia’s Foreign Investment Review Board for the acquisition.
The separation activity is progressing well, adds Fonterra and, provided the remaining regulatory approvals are received within the expected timeframes, the co-op expects the transaction to be complete in the first quarter of this year.
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The process of implementing the capital return involves a share buyback and then cancellation and subdivision of shares so that shareholders hold the same number of shares after the capital return as they did beforehand, the co-op says, adding: “This is designed to ensure no shareholder’s compliance with Fonterra’s minimum shareholding requirements or their voting entitlement is affected by the capital return.”
The capital return requires approval by at least 75% of the votes cast. If the resolution is approved, Fonterra will seek final court approval to undertake the capital return subject to divestment completion.
Meanwhile, Fonterra is inviting applications from farmers in South Island to join its organic business.
The recruitment of farmers interested in converting as well as existing organic farms will initially focus on those located around Southland and up to the Canterbury region.
Fonterra is also continuing the recruitment of more organic farmers in North Island, where more than 100 farms are part of its organic programme.
“We already have a strong performing organic business but have more room for growth based on increasing demand from customers around the world,” said Anne Douglas, group director, Fonterra Farm Source.
“Our plan is to be able to process organic dairy products at our Stirling site from the 2028/29 season, with the recruitment process starting now to allow time for converting farmers to achieve organic certification.”
In recent years, the global organic dairy category has shown consistent retail sales value growth year-on-year, says Fonterra, adding that the co-ops is “well positioned to capitalise on the growing demand” with a “diverse product range, broad market access and strong customer partnerships”.
Andrew Henderson, Fonterra’s general manager for organics, said the co-op offers support for its shareholding farmers throughout their transition to organic.
“Our support package includes conversion incentives, advice, networking opportunities and linking farmers up with peers who can mentor them through the process,” he added.
“Organic farming might not be the right fit for all shareholders, but for those interested in converting it has the potential to unlock additional returns.
“For example, since the Organic Milk Price was first established in 2016/17, it has delivered an average premium of ~$2 per kgMS above the Farmgate Milk Price. There’s also the potential for lower input costs that are typical in New Zealand’s grass-fed organic systems.”
Fonterra’s organic business has been running since 2002, with Hautapu, Morrinsville and Waitoa UHT producing the majority of the its organic dairy products.
