National Foods completes Dairy Farmers acquisition, WCB joint venture to begin next year

Posted by Daniel Palmer on 28th November 2008

The takeover of Dairy Farmers by Kirin subsidiary National Foods was officially completed on Tuesday, with the cheese joint venture between National Foods and Warrnambool Cheese and Butter (WCB) expected to begin operation early next year.

Milk splash

Dairy Farmers Chairman Ian Langdon, who along with other directors will resign from the Dairy Farmers Board today, said the $910m acquisition of the business by National Foods stood to have a positive impact on Dairy Farmers’ shareholders as well as the broader industry. “This injection of capital on-farm stands to have a strongly positive impact in both the short term and further into the future,” he said. “National Foods will become Australia’s largest domestic dairy player in revenue terms, which should result in a stronger processor and provide greater milk off-take security for suppliers.”

“Today’s change in the ownership of the Dairy Farmers business is the culmination of a journey that began in 2004 when our members voted overwhelmingly in favour of change,” Mr Langdon concluded.

WCB confirms that their joint venture with National Foods, to acquire and operate the cheese business of Dairy Farmers, is still to be finalised. Both parties remain committed to establishing the Cheese JV as soon as practicable, WCB advised yesterday.

Until the establishment of the Cheese JV, National Foods will manage all the cheese sites, with WCB represented on an interim working group that is conducting a business review and transition planning.

It is currently proposed that the Cheese JV, once established, will see WCB managing the manufacturing operations at the Cheese JV sites (excluding Malanda), with National Foods continuing to manage distribution, sales and marketing activities.

The current timetable for establishing the Cheese JV is:
* Documentation of Cheese JV and Board approvals – By end December 2008
* Cheese JV formed and consideration paid by WCB – January/February 2009
* WCB equity raising – 1st Quarter 2009

The formation of the Cheese JV remains subject to various conditions, however, including Board approval by WCB, National Foods Limited and Kirin Holdings.