By Arundhati Dutta, Sameer Manekar and Praveen Menon
(Reuters) – Fonterra Co-operative Group is considering an initial public offer of its Australian operation, the world’s biggest dairy exporter said on Thursday, in an exercise that could return about $700 million to shareholders by 2024.
The first public revelation of the plans to list comes after the New Zealand dairy giant scaled back its global ambitions with a strategy to phase out overseas “milk pools”, cut debt and focus on local production.
“It’s a self-contained business, so there is a possibility of partnering effectively by taking some capital off the table and bringing some external investors,” Chief Financial Officer Marc Rivers told Reuters in an interview.
“That’s why we announced our intention to explore that partial sale,” he said, adding that Fonterra would retain a significant stake as Australia was a destination for a lot of New Zealand milk.
The process has just begun, with Fonterra exploring the level of interest for an IPO, Rivers said.
The company owned by its 10,000 New Zealand farmer shareholders said it was also reviewing the ownership of its milk pool in Chile.
About NZ$1 billion ($700 million) of the divestment proceeds from the Australia and Chile businesses will be returned to shareholders by 2024, Rivers said.
“If our strategy is focused on New Zealand milk, then we don’t need capital tied up for that,” he added. “We can harvest that, release it and bring that in.”
Fonterra reported after-tax net profit of NZ$599 million ($419.36 million) for the year ended July 31 on Thursday, down NZ$60 million from a year earlier.
It also proposed a new capital structure for new farmers to enter the co-operative more easily, as part of the strategy to claw back domestic market share.
Fonterra’s share of the domestic market for milk processing dropped to 82% by 2019 from 96% in 2001, with consultants TDB Advisory saying at the time it was expected to reach about 75% in 2021.
The new structure will also limit non-farmer investment in the listed Fonterra Shareholders Fund to protect farmer ownership and control.
(Reporting by Sameer Manekar and Arundhati Dutta in Bengaluru; Editing by Vinay Dwivedi and Clarence Fernandez)