Fonterra to buy New Zealand Dairies

Dairy giant Fonterra has a conditional agreement to buy the milk processing assets of Russian in-receivership company New Zealand Dairies - but the deal will have to pass the Commerce Commission sniff test.

Under the agreement, existing farmer suppliers to the South Canterbury processor would be paid in full by the company's receivers. Farmers would also be able to get their milk processed and paid for at the start of the new dairy season.

Fonterra chief executive Theo Spierings said the acquisition would ensure the Studholme milk plant continues to operate and its farmer suppliers have certainty.

The plant was processing around 150 million litres of milk a year into milk powders for export. 

Spierings said the plant would complement Fonterra's new Darfield plant which starts processing in August.

Existing suppliers have been offered the opportunity to supply Fonterra on contracts, which would enable them to become fully share-backed suppliers after this new season, and require them to become shareholders within six years.

Fonterra chairman Sir Henry van der Heyden in an email to shareholders today said Fonterra would operate the plant while the Commerce Commission was considering the application so no milk would be spilt.

NZ Dairies had around 30 suppliers. The plan was for Fonterra to formally take over the plant on August 1.

NZ Dairies has 60 staff, Fonterra said.

Waikato Times