A planned public listing of Fonterra’s Australian operations will attract investors, especially dairy farmers, according to Freshagenda analyst Steve Spencer.
However, he believes a takeover by another Australian dairy player seems unlikely due to competition concerns.
A review of Fonterra Australia’s ownership is underway as part of the cooperative’s new strategy to add value to its New Zealand milk.
Fonterra says any option should consider the cooperative retaining a significant stake in Australia. Options could include a partnership with a strategic or financial investor.
The property review is expected to be completed by the end of this year, but any changes in the ownership structure are still 12 months away.
Fonterra says the Australian company is in a good position, not only in terms of revenue, but also in reputation with its customers and especially with its farmers.
However, Spencer said investors would wait for IPO documents to see how the Australian company would be excluded from the group’s results.
“There isn’t enough visibility to see this completely at this point,” he told Rural News. “I think there will be investor appetite – depending on the price and performance set in an IPO.
“There are few public and institutional investment opportunities in the food sector and the growth, depth and diversity of dairy markets is a good story.”
Spencer also expects Australian farmers, especially those who currently supply Fonterra, to be interested in buying shares.
“I’m sure there will be some interest but this will be clarified by the company in their engagement.”
But there will be few options for the big players to take on this business without competition concerns due to the crossover of product segments.
Spencer says Lactalis could be a potential buyer if the company fits its global business model.
“They don’t have competing opportunities in other markets – Saputo and Bega would be excluded.
Australian dairy consultant John Droppert believes farmers will wait and see what comes out of the property review.
“I suspect that most vendors will just be curious to see what results and what the ongoing connection to Fonterra overall would be as part of any proposal,” said Droppert. Rural news.
Fonterra Australia Suppliers Council chairman Alan Davenport hopes ownership options may provide opportunities to further align supplier interests.
“I look forward to working with Fonterra Australia to ensure that any change in the ownership structure is supported by the partnership between Fonterra Australia and its agricultural suppliers,” Davenport said.
Fonterra is an Australian butter and cheese market leader with iconic brands like Western Star, Perfect Italiano and Bega.