Australian dairy is clearly flavor of the month in M&A markets.
While three companies battle it out for control of Warrnambool Cheese & Butter Factory Co. Holdings Ltd., Fonterra Co-Operative Group has swallowed the assets of Tamar Valley Dairy in a deal with the yogurt producer’s administrators.
New Zealand’s Fonterra said it is buying the processing equipment, related services, and intellectual property and trademark for the Tamar Valley Dairy brand for an undisclosed sum. Tamar Valley Dairy was placed in administration earlier this year.
It represents the second deal by Fonterra–the world’s largest dairy exporter–in Australia in the past week as it looks to expand its presence across the Tasman Sea. On Friday, Fonterra said it had bought a 6% stake in dairy company Bega Cheese Ltd.BGA.AU -3.22% for 46 million Australian dollars (US$44 million).
The purchase of a stake in Bega was partly a response to the deal frenzy in Australia’s dairy industry. Theo Spierings, Fonterra’s chief executive, says it is important that Fonterra participates in Australia’s “consolidation activity.”
Fonterra collects about 22 billion liters of milk a year and accounts for about a third of global supply of products ranging from pizza cheese to baby formula.
Still, the dairy company has faced considerable pressure in Australia in recent years. The company’s Australian sales fell about 14% in the financial year ended July 31, 2012, and were down by a similar amount in the first half of fiscal 2013.
“Acquiring the Tamar Valley Dairy yogurt business is a very important step in strengthening Fonterra’s strong national position in the chilled dairy segment in Australia,” said Judith Swales, managing director of Fonterra Australia.
Fonterra plans to integrate the company into its Australian manufacturing operations.
Agricultural assets in both Australia and New Zealand have moved on to the investment radar as an increasingly affluent Asia grows hungrier for dairy products.
A three-way tussle is underway for ownership of Australia’s oldest dairy company, Warrnambool Cheese & Butter. Saputo Inc.SAP.T -0.33%, Canada’s largest dairy processor, Bega Cheese and Murray Goulburn Co-operative Co. have made separate takeover offers for the company.
Source:WSJ