Groupe Lactalis S.A. has applied to the Australian Competition & Consumer Commission to buy Fonterra Co-operative Group Limited (NZSE:FCG)'s Mainland Group, in a further sign that the French dairy giant is in pursuit. Fonterra is said to be appealing against a court ruling that failed to provide clarity on Bega's legal rights over its commercial agreement with the New Zealand-based dairy giant to sell products with the Bega brand. The ACCC is seeking feedback on the acquisition by Lactalis, seen as the frontrunner to buy the $2 billion-plus Fonterra spin-off Mainland.
Lactalis is pursuing the business as a whole, rather than just the Australia and New Zealand operations like rival suitor Bega, and Fonterra wants a clean deal that involves a sale of all the assets together. Bega has not been given access to the data room by Fonterra because it refuses to waive what it believes is its rights to stop a change of control of its trademark Licensing agreements that are currently held by Fonterra. A deal with Bega could be challenging to get past the ACCC, but the Australian-listed group is seen as the buyer to pay the most for Fonterra's local Mainland arm, which sells brands such as Western Star butter and Perfect Italiano cheese, because it can extract synergies.
Some say Lactalis could offer one price for the business if clarification around the legal situation cannot be ironed out, but a higher price if there's no risk to losing the Bega brand -licence. With the Bega licenced products accounting for about 6% of annual Mainland sales of NZD 4.9 billion ($4.5 billion), it is seen as critical to the business and a must have for any buyer. Rothschildis advising Lactalis.
The sale contest, run by Craigs, Jarden and JPMorgan, is in the early stages of the second round.
