Dairy Board looks for next merger

By Aimee McClinchy

Friday 5th May 2000

The Dairy Board's $A550 merger plan with giant Victorian group Bonlac is likely to be the first of many and does not close doors on Sydney-based giant Dairy Farmers joining them in some form of a super-conglomerate.

The merger affecting the board's Australian operations has, for the meantime, replaced the $A2.5 billion talks between Dairy Farmers and Bonlac, and formed the first transtasman alliance across two deregulating dairy industries.

But Dairy Farmers this week indicated this was not the end of talks between itself and Bonlac, two of Australia's largest dairying entities, and said there might be opportunities for joint ventures or alliances with the merged Dairy Board and Bonlac entity in areas such as distribution.

The board has confirmed it will look to form other global ventures and mergers to strengthen its marketing and exporting position.

The heads of agreement sees the board merge its Australian consumer business with Bonlac's in a 50/50 joint venture worth $420 million. Its Australian ingredients business will be merged into Bonlac, with the board responsible for exporting Bonlac's ingredients supplies. The board paid a reported $120 million for a 25% stake in Bonlac.

The Dairy Board has been described as a strong partner for Bonlac, whose ratings outlook was revised from stable to negative in mid-April by Standard & Poor's, with a credit rating of BBB.

S & P's outlook for the board is also negative, with a credit rating of AA, with S & P saying it would not reassess it until the deal had been ratified in September.

Meanwhile, the local manufacturing dairy companies, led by Dairy Group and Kiwi Co-op Dairies, are sitting tight and reassessing their future in the wake of the failed mega co-op, and this week foiled farmer plans to progress mega co-op talks.

The board's merger, focused on marketing and exporting, is independent of any farmer plans to merge the country's manufacturing dairy companies in a bid for some form of mass scale.

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