Fonterra buys milk-processing factory

Fonterra's acquisition of the New Zealand Dairies Ltd's milk-processing factory at Studholme has been described as "absolutely the best news" for the Waimate community.

The Russian-owned dairy factory was placed into receivership on May 17, with the receivers calling for bids to buy the business and assets. It had previously been on the market.

Yesterday, Fonterra confirmed it had entered into a conditional agreement to acquire the milk-processing assets, subject to Commerce Commission clearance.

The acquisition would result in NZDL's existing farmer suppliers being paid in full by the receivers and being able to have their milk processed and paid for from the start of the new dairy season, which starts in a few weeks.

Waimate Mayor John Coles described the acquisition as "great news".

"The grey cloud has probably gone now from what's going to happen."

It was very pleasing to see farmers were not going to be "out of pocket" and payment was going to be made.

He understood there were about 60 employees and it was great they were going to retain employment and that it was "business as usual".

While Mr Coles was optimistic there might be the possibility of expansion at the site in the future, a Fonterra spokesman said it was "too early to even go there".

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

It would complement the co-operative's new Darfield plant, which was due to start taking milk in August, chief executive Theo Spierings said.

"Our Strategy Refresh has clearly identified the importance of growing milk volumes and optimising our New Zealand manufacturing operations.

"This transaction helps deliver on that priority," he said in a statement.

NZDL's existing suppliers have been offered the opportunity to supply Fonterra on contracts, which would enable them to become Fonterra fully share-backed after the 2012-13 season and require them to be shareholders within six years.

Fonterra planned to operate the plant until the end of the 2012-13 season pending a decision by the Commerce Commission about the co-operative's clearance application.

"This means that we are able to collect and process farmers' milk from the start of the new season, avoiding the prospect of them having to spill milk.

"The solution we've developed with the receivers will mean that suppliers who continue to supply NZDL have a tanker coming up their driveway to take their milk and ensures they still have an income.

"It also means we are able to provide for continued employment to many of NZDL's staff during this period," Mr Spierings said.

Federated Farmers dairy chairman Willy Leferink said his organisation had thought Fonterra was an unlikely contender for NZ Dairies.

Fonterra was preferable "to a hard-nosed corporate" buying the assets for the regulated milk it would secure.

"Such an outcome would treat farmer-suppliers as just another input. So this deal strongly vindicates that co-operative business model."

Eyes now turned to what could be salvaged for creditors of NZ Dairies.

Some sharemilkers would be seriously affected by the receivership, and farm balance sheets would "take a hit", Mr Leferink said.


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