Fonterra plans to acquire 20% stake in one of China's biggest milk processors, Beingmate, to form a global partnership with a total investment of $615m, which would help meet China's growing demand for infant formula.
The partnership would create a fully integrated global supply chain from Fonterra's milk pools and manufacturing sites in New Zealand, Australia, and Europe directly to China's consumers.
Fonterra will shortly begin the process to issue a partial tender offer to gain up to 20% stake in Beingmate.
Upon receiving regulatory approvals and completion of partial tender offer, Fonterra and Beingmate will establish a joint venture to purchase Fonterra's Darnum plant in Australia and also establish a distribution agreement to sell Fonterra's Anmum brand in China.
Fonterra said the infant formula market in China was worth about $15.05bn currently, and would be worth some $27.5bn by 2017.
Further, Fonterra is seeking to spend $555m on expanding its milk powder making capacity in New Zealand.
Fonterra CEO Theo Spierings said: "Our strategy is to increase earnings by driving more milk volume into higher value categories globally by turning the wheel from commodities to higher-margin products.
"By creating more options for our New Zealand operations we are better placed to be able to make the product mix that delivers the greatest returns to our farmers and meet the needs of our consumers and customers worldwide," Spierings added.
