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Bonlac Supply shareholders vote in favour of offer

MEDIA STATEMENT
4 August 2005

Bonlac Supply Company shareholders vote in favour of Fonterra’s offer

Melbourne, August 4, 2005 – Bonlac Supply Company (BSC) shareholders today voted 94 per cent in favour of Fonterra Co-operative Group’s offer to restructure Bonlac Foods Limited (BFL) which, as a result, will become a wholly owned subsidiary of Fonterra.

Fonterra Chairman, Mr Henry van der Heyden, pleased at such a resounding endorsement of Fonterra’s offer, said that through full ownership of BFL, Fonterra will be in a position to invest in growth of the company’s milk supply, improve its balance sheet and create greater manufacturing scale and efficiencies.

“I’m very pleased at the way Bonlac shareholders have welcomed our offer. Full ownership of BFL is entirely consistent with our key objectives in Australia and now it is up to Fonterra to go ahead with plans to build more efficient production, a stronger domestic branded business and contribute further to a globally competitive sector.”

BSC Chairman, Mr Noel Campbell, said that today’s hugely successful vote reflected the fact Fonterra had put a strong and fair offer on the table and that both companies were eager to work together in the future.

“BSC shareholders have recognised that Fonterra’s offer will provide them with greater security and better returns and help to achieve growth and investment that BFL could not achieve if its current structure were to remain in place,” he said.

“Today’s result ushers in a new era for BSC farmers that will be defined by stronger returns and an opportunity to be part of a growing business that Fonterra will be investing in.

“The positive response by farmers today also indicates that BSC farmers want to be at the forefront of a dynamic and growing Australian dairy sector.”

Fonterra Chief Executive Andrew Ferrier said the immediate priority would be a move to optimise capacity at BFL’s plants as well as growing milk supply. He also reiterated that the further strengthening of Fonterra’s position in Australia remained a key focus.

“This is a successful and significant step for us in Australia but we still believe there is further consolidation to come in the industry here. We see this as a key local market for Fonterra and we will be part of any further industry changes,” he said.

“We’ll also be looking at how we can further strengthen BFL’s balance sheet, reduce the costs of servicing debt, and where we can apply new investment to grow the business.

“Staff will see very little impact on their day-to-day operations as they will continue to work for BFL and have the same terms and conditions and the same contracts. The transition for farmer suppliers should also be seamless allowing them to continue to run their businesses as usual but, with the added security and stability of Fonterra’s backing.”

BSC Chairman Noel Campbell said suppliers will be asked to vote on proposed changes to the structure of the BSC Board at the Annual General Meeting later in the year.

“The BSC Board will now be expanded and continue to manage farmer shareholding interests in line with share policies and also to begin to act in an advisory capacity to Bonlac Foods,” Mr Campbell said.

“The agreement we have reached with Fonterra requires the agreement of both parties on certain issues such as milk price, incentives and quality standards and the BSC Board will play an important advisory role to BFL in the future.”

The completion date for the transaction is September 1, 2005.

ENDS

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