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Wednesday, August 27, 2025

Ele Ludemann: Not like Lotto


This isn’t Lotto.

That was the response of a Fonterra shareholder to a friend who said the pay out expected if the company’s sale of its global consumer and associated businesses to Lactalis for $3.845 billion goes ahead would be like winning a lottery.

. . . The sale comprises Fonterra’s global Consumer business (excluding Greater China) and Consumer brands; the integrated Foodservice and Ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business.

In addition to the base enterprise value of $3.845 billion, there is potential for a further $375 million increase from the inclusion of the Bega licences held by Fonterra’s Australian business, which if progressed would take the headline enterprise value of the transaction up to $4.220 billion.

The Co-op is targeting a tax free capital return of $2.00 dollars per share, which is approximately $3.2 billion, following completion of the sale.

As part of the sale agreement, Fonterra will continue to supply milk and other products to the divested businesses, meaning New Zealand farmers’ milk will still be found in iconic dairy brands including Anchor and Mainland. . .

Lotto wins are due to nothing more than luck and usually go to a very few people. The dividend, if the sale goes ahead, will be shared among the co-operative’s 9,000 shareholders who are widely spread around the country.

Any pay out Fonterra shareholders get is not due to luck, it’s a reward for hard work, investment and risk taking.

Suppliers are required to own shares in the company and at times have been asked to increase their shareholding when they may have had other priorities for their money and/or the opportunity for better investments.

The announcement of the agreement to sell hasn’t all been positive and a lot of the criticism has come from people who don’t own shares.

They’re not the ones who’ve done the hard work, made the investments and taken the risks.

It’s not their business, it’s the shareholders’ and they’re the ones who will vote on whether or not the sale goes ahead.

If it does, the dividend which will be hundreds of thousands of dollars to the average shareholder, on top of last season’s milk pay out around $10 a kilo and this season’s which is forecast to be similar, will make it a very good year and not just for the shareholders.

Some of the money will be used to reduce debt and some will flow through other businesses that service and supply farmers as they spend on on repairs, maintenance, the replacement of equipment, and upgrades to houses. . .

Unlike a Lotto win, all of that will be good for the wider economy.

Ele Ludemann is a North Otago farmer and journalist, who blogs HERE - where this article was sourced.

1 comment:

Anonymous said...

It's almost comical the way the left wing media are interviewing people in the street about the wisdom of this sale. These people are not shareholders themselves and have no knowledge at all about the transaction and its ramifications, but for the media and general public they have become the font of all knowledge.