Fonterra sells Bega stake

Chief financial officer Lukas Paravicini said the co-op was focused on investing in higher value-add dairy products which delivered the best returns for its farmer shareholders.

He said releasing the Bega capital for future growth initiatives was the best use of shareholders funds.

Fonterra's considerable export business has suffered an earnings squeeze during the past year as global dairy prices have slumped by more than 30 per cent.

The NZ giant, also a big player in Australia, with suppliers in Victoria, Tasmania, NSW and South Australia, bought its Bega shares in 2013 when the former NSW co-op was also in the throes of attempting to buy Warrnnambool Cheese and Butter in Victoria.

Bega's move triggered what became a four-way bidding war for WCB with Murray Goulburn, Lion and the eventual winner, Canada's Saputo family.

Mr Paravicini said Fonterra's decision to sell its Bega stake had no implications for its long-standing relationship with the company which includes a license to sell the Bega brand in Australia and a cheese supply contract to Bega.

"The Bega brand has an important role in our cheese portfolio where we are a market leader," he said.

"We will continue to build our relationship with Bega, which goes back more than a decade."

Long-running ties between the two businesses began when Fonterra's Australian business, the former Bonlac co-operative in Victoria, began packing its own cheddar output under the Bega brand in the 1980s.

With the extra product available through Bonlac's distribution network, Bega grew rapidly to be Australia's biggest selling cheddar brand.

Fonterra began buying into the Bonlac business in 2003, taking it over in 2005.