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Speaker 1: It turns out instead of a straight trade sale, Fonterira

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Speaker 1: is now considering an IPO to sell off its consumer brands.

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Speaker 1: We're talking the likes of Anchor, Mainland Company and so on.

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Speaker 1: Fonterrasy has had significant interest in buying these brands. Stewart

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Speaker 1: Davison Izidari Insights consultant Haste Stuart, I'm very well, thank you. Listen,

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Speaker 1: before we even get into like the machinations of this thing,

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Speaker 1: good idea to get rid of the consumer brands do

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Speaker 1: you think?

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Speaker 2: Yeah? I think it is from the strategy that the

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Speaker 2: Fonterira team is presented to sharehold. Does it kind of

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Speaker 2: make sense? You know, they want to simplify the core

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Speaker 2: business of Fontira, which is process and newtail milk into

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Speaker 2: ingredients and food service goods, which they do really good,

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Speaker 2: really well, and you know, palm Off will hand off

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Speaker 2: the more complex, fast moving consumer goods business that is

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Speaker 2: the consumer arm of Fontira.

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Speaker 1: Right because they don't have to know how to really

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Speaker 1: leverage these brands properly. But is it that complicated?

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Speaker 2: Stewart, Well, I think, you know, we zoom out a

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Speaker 2: little bit and look at the size and scale of

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Speaker 2: Fonterira globally. You know, they've got the hands reasonably filled

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Speaker 2: with the ingredients and food service part. You know, it's

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Speaker 2: a put in perspective, it's New Zealand's biggest business, full stop,

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Speaker 2: and then you know, zoom a little bit further. It's

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Speaker 2: got all the markets across the world, it's got offices everywhere,

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Speaker 2: and that's just the ingredients. Could you keep that portional

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Speaker 2: scale going. So there's a lot going on, and I

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Speaker 2: think they've admitted to you know, they've got too many

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Speaker 2: balls in the air to really give the consumer side

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Speaker 2: a good going going out, and so you know, palming

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Speaker 2: off to someone else to really put some effort into

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Speaker 2: it and focus on makes a lot of sense.

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Speaker 1: Why would they consider instead of a straight trade sale,

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Speaker 1: which I think we all assume they would do, why

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Speaker 1: would they consider an I p O.

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Speaker 2: Well that's a really good question. Actually, it's kind of

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Speaker 2: a bit of an exciting option for the market too.

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Speaker 2: So you know, taking it from farmer owned cooperative consumer

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Speaker 2: business to then offering up to the I p O

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Speaker 2: market and putting it back on the listed market, it's

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Speaker 2: pretty exciting, you know for those farmers that you know

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Speaker 2: complained when this option came up or the management thought

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Speaker 2: about it and now they can actually have a they

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Speaker 2: can have a stab at owning this business as well.

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Speaker 2: You know, those farmers can when they get their capital return,

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Speaker 2: contain around and go and buy some of this IPO

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Speaker 2: if it gets listed. And then for everyne house in

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Speaker 2: New Zealand for example, they can have a share of

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Speaker 2: this business if it meants their requirements. And then also

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Speaker 2: you know, for institutional investors as well, to get a

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Speaker 2: bit of an exposure to the world of theory consumer goods.

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Speaker 2: It's it's quite an exciting opportunity if it's presented well,

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Speaker 2: it could be quite a good opportunity.

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Speaker 1: But Stuart, am I reading this wrong. In my head,

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Speaker 1: an IPO means Fonterra retains some ownership of it.

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Speaker 2: Yeah, can do. Yeah, there's definitely a portion that Fonterra

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Speaker 2: could keep fifty one percent or forty percent, you know,

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Speaker 2: you roll the dice and pick a number. But the

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Speaker 2: end of the day, they can also you know, IPO

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Speaker 2: hold for the whole period and then slowly eat their

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Speaker 2: way out of it too. So at that point there's

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Speaker 2: you know, once we get over that whole period which

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Speaker 2: is all all determined by the exchange and the company

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Speaker 2: and ownership and the investment bank that underwrites it. You know,

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Speaker 2: that can all be figured out in future in due course,

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Speaker 2: but Fonterra might want to keep control of it. Two,

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Speaker 2: considering you know what they've told us that there's going

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Speaker 2: to be supplied agreements in the background with whatever they

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Speaker 2: do in the consumer business space to make sure that

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Speaker 2: the milk and produced by New Zealand Farmers continues to

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Speaker 2: find those brands.

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Speaker 1: I see they've also decided to retain they were going

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Speaker 1: to sell, but they're not going to anymore. A very

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Speaker 1: small China consumer business and then also a Saudi manufacturing factory. Why.

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Speaker 2: Yeah, Well these are questions I don't have the exact

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Speaker 2: answer for, but I mean those are very important markets

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Speaker 2: for them for both. So I mentioned they're probably small

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Speaker 2: enough or have some value to the ingredients space or

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Speaker 2: the food service space, you know, to complement the existing

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Speaker 2: businesses there, or that the businesses they look to retain

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Speaker 2: going forward.

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Speaker 1: Stuart, thanks for the insights. Appreciated that. Stuart Davisondiry Insights Consultant.

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