Dairy co-op squeezes $555m from cross-border sale with Russell McVeagh’s help

The co-op divested its farms in China in two separate offshore deals

Dairy co-op squeezes $555m from cross-border sale with Russell McVeagh’s help

Russell McVeagh has assisted dairy co-op Fonterra in the sale of its farms in China for a total of $555m.

The divestment was made in two separate offshore deals with China Youran Dairy Group Limited subsidiary Inner Mongolia Natural Dairy Co., Ltd and Beijing Sanyuan Venture Capital Co., Ltd. Fonterra sold its farming hubs in Ying and Yutian to Inner Mongolia Natural Dairy for $513m, and relinquished to Beijing Sanyuan Venture Capital the 85% interest in its Hangu farm for $42m.

The completion of the deal is pending anti-trust clearance and other regulatory approvals in China.

“Selling our China farms is in line with our strategy of focusing on our NZ farmers’ milk and will also allow us to focus on strengthening our food service, consumer brands and ingredients businesses in China, which remains one of Fonterra’s most important strategic markets,” Fonterra director of legal Andrew Cordner said.

He highlighted the complexity of the deal even without accounting for the effect of the COVID-19 pandemic.

“This is one of the most complex and challenging M&A deals that Fonterra has undertaken for some time and would have been so even without the impact and challenges of COVID-19 on the due diligence and negotiation process,” Cordner said.

Cordner took point on Fonterra’s in-house legal team alongside senior corporate counsel Felipe Rojas. Meanwhile, M&A and business development director Sarah Judkins led the co-op’s M&A team with M&A manager Sam Weir. Both teams worked closely with the Russell McVeagh team on the two transactions.

“Negotiations were undertaken in challenging circumstances given the global pandemic and restrictions on international travel, and we are very pleased to have been able to take a lead role in assisting Fonterra to work through the complexities of the sale, which will allow Fonterra to further focus on its strategic priorities,” Russell McVeagh lead partner Ben Paterson said.

Paterson, who has been named one of NZ Lawyer’s Rising Stars for 2020, was supported by solicitors Tori Selwood and Sophie Mentink.

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