Fonterra, Nestle eye Chile expansion

Last updated 13:26 29/11/2010

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New Zealand dairy heavyweight Fonterra and global food company Nestle want to expand their Americas joint venture into Chile, a deal which would involve parts of Fonterra's Soprole business.

Soprole and Nestle Chile have applied to the Chilean competition authority for approval for a 50:50 joint venture, which would generate sales of around $770 million a year, largely from Soprole's business, Fonterra says.

Because Soprole is contributing a bigger business to the proposed deal, Fonterra will get about $300m when Dairy Partners of America Chile is established, said Chicago-based Andrei Mikhalevsky, managing director Fonterra global ingredients and foodservice.

Fonterra and Nestle's joint venture Dairy Partners America was created in 2002 and operates in Brazil, Ecuador, Venezuela Columbia and Argentina.

The new venture would accelerate the growth of the liquid and consumer dairy market in Chile, which has grown rapidly in the past three years, Mikhalevsky said.

"We are looking to increase dairy consumption and drive higher milk production levels in Chile."

Fonterra's dairy ingredients and export business in Chile, Prolesur, will remain outside the new venture. Nestle's milk powder, condensed milks and export products will also stay outside the deal.

Fonterra said similar applications to the competition tribunal have taken at least 12 months to progress.

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