French company Danone buys Balclutha, Auckland dairy plants

French dairy giant Danone has bought two New Zealand plants for an undisclosed sum, one of them in South Otago, co-owned by Dunedin businessman Grant Paterson.

Danone's local subsidiary Nutricia will buy Mr Paterson's Gardians drying plant near Balclutha, which he started in a joint venture with Brent Sutton, from Sutton Group.

The other acquisition is Sutton Group's Auckland blending and packing plant.

The purchase is to make up for dairy supplies lost when Danone ended its supply contract with Fonterra last year, and will allow it to maintain and possibly increase its exports to China.

Mr Paterson said his 18 South Otago dairy farms were not part of the deal and they would subsequently become ''the major supplier'' to Danone.

A Danone spokeswoman contacted in Australia said Danone intended to use the ''full capacity'' of both plants to ''fill our increasing needs, in New Zealand and Australia''.

''This acquisition is an investment in growing the Danone Nutricia footprint, in New Zealand and Australia to start with, and potentially within the wider Asia Pacific region,'' she said. An industry source suggested there would be large expansion investments in the respective plants.

Separately, Danone and Fonterra are headed to court over last year's botulism scare and recalled products. Danone said in its full year results last month it had lost 370 million (NZ$597 million) of sales because of the scare, while the cash impact was 291 million.

Danone's net profit slumped 15% in 2013 after the food safety warning by Fonterra, its key supplier, which forced Danone to launch a recall in Asia.

Construction of the Gardians plant near Balclutha on a 4ha site began in September 2011. It was operational the following year, with the target of finishing 20,000 tonnes of dairy nutritional products a year.

''This transaction [plant acquisitions] will provide Nutricia with a large milk drying capacity, along with a long-term fresh milk supply access,'' the company said in a statement in Paris last Thursday.

''It will also add an infant formula blending and packing facility to Nutricia's existing operations platform.''

The purchase was subject to regulatory approval and was expected to be complete in the next few months, Danone added.

Sutton Group and Gardians (Greenfields, Agricultural Research, Dairy Innovation and Nutritional Systems) are among the infant formula companies which last week gained registration to export to China under new food safety regulations, BusinessDesk reports.

Nutricia itself gained registration, as did Fonterra Co-operative Group, GMP Pharmaceuticals and Dairy Goat Co-operative (NZ). They represent about 90% of New Zealand's infant formula exports to China by volume.

Other companies can be registered after the May 1 deadline, although owners of infant formula brands who cannot demonstrate a close relationship with a manufacturer could struggle to meet Chinese requirements, Food Safety Minister Nikki Kaye said on Friday.

China telegraphed its new requirements to the New Zealand Government last week by releasing an audit of a sample of New Zealand manufacturers conducted in March, leaving officials and companies scrambling to interpret the changes before the May 1 registration deadline.

Nutricia's local arm recorded $373 million worth of sales in 2012, and delivered a profit of $61 million to its parent, Nutricia International.

Additional reporting by AFP/BusinessDesk.

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