Fonterra to assess IPO as one option for consumer unit sale

FONTERRA Cooperative Group will go ahead with the sale process for its global consumer businesses, saying it will consider an initial public offering (IPO) and reiterating that a successful deal will result in a capital return for its farmer shareholders.

“We have assessed both a trade sale and IPO as attractive divestment options and will now prepare for a sale process which will pursue both options,” chief executive officer Miles Hurrell said on Monday (Nov 11) in Auckland. The company “continues to target a significant capital return to be made to farmer shareholders and unit holders following the divestment”, he said.

Fonterra announced in May it was considering turning away from branded consumer products to concentrate on making more high-value ingredients derived from New Zealand milk that it sells to other companies such as Nestle, Mars and Coca Cola. A report last week suggested it may return NZ$3 billion (S$2.4 billion) to its roughly 8,300 shareholding farms if a full exit was achieved.

The businesses, which include consumer brands such as Anchor, Anlene and Mainland as well as Fonterra Oceania and Fonterra Sri Lanka, together account for about a fifth of Fonterra’s revenue.

Hurrell said the company has received “meaningful buyer interest” in the businesses earmarked for divestment.

“We will thoroughly test the terms and value of both a trade sale and IPO with the market before seeking support from farmer shareholders for a divestment option through a vote,” he said. “A final decision on which divestment pathway to pursue will be based on several factors, including which option will result in optimal long-term value for the co-op.”

The valuation report last week from Northington Partners said the businesses may be worth as much as NZ$3.4 billion, or about NZ$2 a share, to farmer shareholders. BLOOMBERG