Fonterra sells global consumer group to Lactalis

Fonterra Co-operative Group has agreed the sale of its global consumer and associated businesses to Lactalis for $3.845 billion, subject to certain customary financial adjustments and conditions including approval by farmer shareholders, separating the businesses being sold from Fonterra, and receipt of certain final regulatory approvals.  

The sale comprises Fonterra’s global consumer business (excluding Greater China) and consumer brands; the integrated foodservice and Ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business. 

In addition to the base enterprise value of $3.845 billion, there is potential for a further $375 million increase from the inclusion of the Bega licences held by Fonterra’s Australian business, which if progressed would take the headline enterprise value of the transaction up to $4.220 billion.  

The co-op is targeting a tax free capital return of $2 dollars per share, which is approximately $3.2 billion, following completion of the sale. 

As part of the sale agreement, Fonterra will continue to supply milk and other products to the divested businesses, meaning New Zealand farmers’ milk will still be found in iconic dairy brands including Anchor and Mainland. 

Fonterra chairman Peter McBride says over the last 15 months, the board has thoroughly tested the terms and value of both a trade sale and initial public offering (IPO) as divestment options.  

“Following a highly competitive sale process with multiple interested bidders, the Fonterra board is confident a sale to Lactalis is the highest value option for the co-op, including over the long-term. Alongside a strong valuation for the businesses being divested, the sale allows for a full divestment of the assets by Fonterra, and a faster return of capital to the co-op’s owners, when compared with an IPO.  

 “This, coupled with the firm belief we have in Fonterra’s long-term strategy, gives the board the confidence to unanimously recommend this divestment to shareholders for approval,” says McBride. 

Fonterra CEO Miles Hurrell says the sale agreement represents a great outcome for the co-op. “As the world’s largest dairy company, Lactalis has the scale required to take these brands and businesses to the next level. Fonterra farmers will continue to benefit from their success, with Lactalis to become one of our most significant Ingredients customers.  

“At the same time, a divestment of these businesses will allow Fonterra to deliver further value for farmer shareholders and New Zealand by focusing on our world leading Ingredients and Foodservice businesses, through which we sell innovative products to more than 100 countries around the world, from our home base here in New Zealand,” says Hurrell.  

Lactalis CEO Emmanuel Besnier says “with this acquisition, we significantly strengthen our strategy across Oceania, Southeast Asia and the Middle East. Combining the Fonterra consumer business operations and market leading brands with our existing footprint in Australia and Asia will allow Lactalis to further grow its position in key markets. I’m delighted to become a key partner to Fonterra over the long term as well as I’m looking forward to welcoming new teams to the Lactalis family.”

The divestment comprises the sale of shares in Mainland Group Holdings, a New Zealand incorporated holding company that is currently owned by Fonterra.  

The inclusion of the Bega licences held by Fonterra’s Australian business would be confirmed once a dispute with Bega Cheese is resolved. If for some reason the Bega licences are not included in the sale, Fonterra expects to receive a fair value payment from Bega for the licences, which would need to be determined at the time. 

Under the terms relating to the sale, Fonterra will continue to supply raw milk, dairy ingredients and products to the divested businesses under long-term supply agreements. 

Alongside shareholder approval, the divestment is conditional on final regulatory approvals being received from the Overseas Investment Office in New Zealand, the Foreign Investment Review Board in Australia, as well as relevant competition regulators and foreign direct investment regulators in certain countries including Kuwait, New Caledonia and Saudi Arabia. In July 2025, the Australian Competition & Consumer Commission announced it would not oppose the proposed acquisition by Lactalis in Australia.  

The divestment is also conditional on separation of the businesses from Fonterra and no material adverse change arising before completion. Subject to satisfaction of all conditions, the transaction is expected to complete in the first half of the 2026 calendar year.