Fonterra hits legal obstacle in plan to sell Mainland Group (2025)

• Fonterra sale of consumer products business hits roadblock
• Australian court dismisses Co-op's case over use of Bega Cheese trademarks
• Fonterra still to decide whether to sell entire business or in parts
• Co-op wanted legal clarity on using trademarks.

Dairy giant Fonterra's plan to sell its consumer products businesses has struck a legal obstacle that might delay or alter the multi-billion dollar divestment.

The Supreme Court of New South Wales has dismissed a case filed by Fonterra over trademark licensing agreements with Australia dairy company Bega Cheese, saying it did not have jurisdiction to make a declaration on a deal which not exist.

Fonterra has a long standing agreement to make cheese in Australia under the Bega brand, and wanted a ruling that its divestment plans would not affect the existing trademark deal and trigger clauses which would allow Bega to end the deal.

"Until a particular restructure and a particular sale process are identified, it is not apparent that the specific declarations sought would be of any utility," Justice Elisabeth Peden said in her judgement.

She said Fonterra had "no scheduled sale, nor restructure agreed by a purchaser".

Fonterra pressing on

Fonterra said the decision did not alter its plan to sell the consumer businesses, which it has said could be sold as one entity called Mainland, or various individual operations.

The divestment, which has been touted by some analysts as being worth as much as $4 billion, is part of a plan to get back to basics by concentrating on processing New Zealand milk in this country.

The co-operative said it had a clear understanding that the provisions of its licensing agreement with Bega were not impacted by a divestment process.

"This does not change Fonterra's divestment plans for its global consumer and associated businesses and Fonterra may seek a court determination at a later date."

In court proceedings, Fonterra's lawyers were reported telling the court a negative decision on the trademark use could kill the divestment plan or materially affect the sale price.

Bega Cheese so far has not taken part in due diligence study of the businesses up for sale.

"We hope to work constructively with Fonterra Group on the sale of its Oceania businesses of which Bega Group is a natural acquirer and remains very interested in," Barry Irvin, executive chairman of Bega Group, said.

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