Lactalis billions for Fonterra stir emotions

Should the members of Fonterra say yes or no to a deal with the French Lactalis? Fonterra is in favor. Many members probably are too, as Lactalis wants to pay 4.2 billion New Zealand dollars (€2.06 billion) for the sale of Fonterra's consumer activities and the Australian dairy division. However, there is also resistance due to 'kiwi' pride, but increasingly authentic concern is also being voiced. This concern revolves around two things: Is Fonterra cutting itself off from future earning opportunities by selling what it calls the 'Mainland group', and leaving high-margin products to others? There is also concern that Fonterra relies too much on the goodwill of Lactalis when it comes to the purchase of raw milk and other dairy commodities. Supply agreementsPart of the sale agreement is that Fonterra and Lactalis will make two agreements regarding the supply of New Zealand milk. This involves a Global Supply Agreement (GSA) that lasts for three years each time and allows Fonterra to receive a premium on the regular milk price. The delivery volume is not known. Additionally, there is a Raw Milk Supply Agreement (RMSA), with a term of ten years and an annual volume of at least 350 million kilograms, to be increased to 550 million kilograms, but at a significantly higher price. Not te be trustedWho guarantees that Lactalis won't quickly wriggle out of those agreements, leaving Fonterra with the fallout? More serious analysts are expressing their concerns about this, but most of the resistance to divesting the consumer activities comes from Winston Peters. He leads the nationalist coalition party New Zealand First and is also the Minister of Foreign Affairs. He complains that 'iconic' consumer brands like Anchor (for butter) and Kapiti are essentially being given away to Lactalis and writes in a letter to Fonterra members that the French cannot be trusted and will ultimately go for financial gain. This means: buying other milk than the high-quality but expensive New Zealand milk and leaving them with the problems. Peters wants dairy farmers to reject the deal with Lactalis and for the Fonterra management to conduct its business better. On October 30, it will become clear what choice the Fonterra members make: will they follow the management and go for an extra sales bonus, or do they also believe that Fonterra should not surrender too much to other companies?