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| Britannia buys out Fonterra in dairy joint venture... |
| BS Reporter / Bangalore Apr 29, 2009, 00:29 IST |
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 Britannia Industries, India’s largest processed food company, has signed an agreement with Fonterra Brands (Mauritius Holding) Ltd, Mauritius, for acquiring the latter’s 49 per cent equity and preference shareholding in Britannia New Zealand Foods Pvt Ltd (BNZF), their dairy joint venture.
This is subject to Reserve Bank of India approval. If it happens, Britannia and its wholly owned subsidiary will hold the entire equity and preference capital of NZF.
Britannia refused to disclose what it would pay for Fonterra’s stake. David Glendining, the latter’s spokesman, said on telephone that the value of their holding, acquired for $19.8 million, had been written down in the past two years. The move is part of Fonterra’s review of investments after dairy prices plunged and credit markets tightened.
The move comes soon after Groupe Danone SA, the world’s biggest yogurt maker, agreed to sell its 25.5 per cent stake in Britannia to its Indian partner, the Wadia group. This gives the latter 51 per cent control of Britannia.
Fonterra Cooperative Group Ltd, the New Zealand-based parent firm which has decided to entirely divest to Britannia, is the world’s largest dairy products exporter, with annual revenue of more than $4 billion. This joint venture was formed in early 2002.
“While we are seeing a lot of growth in India, given the fragmented local milk supply that requires significant development, investing in India’s consumer dairy market is not a core priority at this time,” said Mark Wilson, Fonterra’s managing director for Asia and West Asia. The statement said the two firms had “enjoyed a good business relationship for several years.”
Bangalore-based Britannia and Fonterra have been discussing this issue for around eight months. Britannia wanted to aggressively grow this dairy business with an investment of around Rs 150 crore.
The JV is a Rs 200 crore business and offers a range of dairy products, such as cheese, milk powder, butter and ghee. Its net loss for fiscal 2008 was about Rs 5 crore. Britannia’s recent annual report says the firm has total liabilities of Rs 70 crore and assets of Rs 90 crore.
That Britannia was willing to buy out Fonterra’s stake if the latter was hesitant on fresh investment of the quantum it wanted was stated to Business Standard by senior company officials last October.
With this buyout, Britannia is expected to merge this arm into the flagship Britannia Industries as the front-end for both these companies are already tightly integrated.
“Britannia intends to pursue profitable growth opportunities in differentiated dairy products and solidify its position as a trusted and leading food brand,” said a statement from Britannia’s Managing Director, Vinita Bali, which said the JV had “created a strong foundation in the dairy business, with leadership in categories like cheese.
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