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Fonterra teams up with Beingmate for a “game changer” deal

Fonterra has announced a $NZ615 million deal with Chinese infant food manufacturer Beingmate.

According to The Weekly Times Now, Gippsland’s Darnum milk processing plant will play a vital role in the deal.

Fonterra will form a fully integrated supply chain deal with Beingmate as part of its strategy to move further into higher value products to optimise the value of its milk.

It is the dairy giant’s first involvement with a Chinese processor since its involvement in a tainted infant formula scare, which tainted its “100 percent pure” image.

Fonterra Australia managing director Judith Swales said the Darnum plant could be increased to 100,000 tonnes/year with a “small investment”.

She said it employed 160 staff, had the capability to produce 300 tonnes of product a day and, during the past three years Fonterra invested $15 million into the site.

She described the deal as a “game changer” for dairy in Australia, but was unable to say how much extra milk this venture would require.

Fonterra will seek to purchase a stake of up to 20 percent in the listed company Chinese company and then establish an Australian joint venture which will buy the Darnum plant in west Gippsland.

This joint venture will supply infant formula to Beingmate for its brand in China and is expected to take 6-8 months, but is subject to regulatory approval.

The Darnum factory is currently owned by Fonterra and has a 50,000 tonne a year capacity. Beingmate will own 51 per cent of the joint venture, but Fonterra will operate the factory.

The deal will also include an exclusive distribution agreement for Fonterra’s Anmum infant formula product in China, which will make the Fonterra brand more widely available. Fonterra chief executive Theo Spierings said the Anmum business would be worth $NZ100 million by 2018. Anmum is produced in New Zealand.

Beingmate operates six modernised plants and logistics centres, 80,000 retail terminals, 30 branches across China and more than 1000 authorised stores.

Fonterra chief financial l officer Lukas Paravincini said the purchase of shares in Beingmate would be funded by debt thanks to a strong balance sheet.

This would result in Fonterra’s gearing lifting 2.7 per cent to 45.1 per cent.

If Fonterra was successful in acquiring its target stake it would be entitled to two out of the nine directors on the board, Mr Paravincini told a press conference.

The partnership will also include whey speciality ingredients manufactured at Fonterra’s Heerenveen plant in the Netherlands as well as an alliance with Dairy Crest in the UK.

Parts of the deal are subject to regulatory approval, while the $NZ615 million investment includes proceeds from the Australian joint venture.

Fonterra has invested $NZ1.8 billion into its operations since 2011.

Part of this is its purchase of the Tamar Valley brand in Tasmania and a 10 per cent stake in listed Australian processor Bega Cheese.

Fonterra also announced it would keep its New Zealand farmgate milk price at $NZ6 a kilogram of milk solids and its dividend at $NZ0.20-$NZ0.25/share following a review.

The co-operative also announced it would have an extra 10 per cent capacity in its New Zealand operations to meet the nation’s growing milk pool.

 

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