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Fonterra reaches provisional deal with Beingmate

Fonterra Cooperative Group has reached a provisional deal with Chinese partner Beingmate Baby & Child Food to unwind their Darnum joint venture in Australia.

The joint venture - 51 percent owned by Beingmate and 49 percent Fonterra - produced infant formula products at the Darnum plant in Australia for Beingmate's Chinese customers, and was a key component of Fonterra's plan to expand its reach into China's second and third-tier cities.

That Beingmate partnership included Fonterra taking a 19 percent stake in the Chinese firm for $750 million. That investment was written down by $405 million in the last financial year after several years of under-performance and has been under review since new leadership took over at Fonterra this year.

The New Zealand Herald today reported China's Great Wall - one of four national asset management firms - is poised to take a controlling stake in Beingmate.

"We’ve been open about the fact we’re looking at all aspects of our investment in Beingmate, as part of that broader strategic review," a Fonterra spokesman said in an emailed statement. "This includes our Darnum joint venture. Fonterra and Beingmate have reached a provisional agreement on the key terms to unwind the Darnum joint venture."

The New Zealand dairy processor will provide more details at tomorrow's first-quarter result.

Economists predict Fonterra will have to lower its forecast farmgate payout at tomorrow's update as it contends with record domestic production and weak global prices.

Both Fonterra shares, which can only be owned by farmers, and Fonterra Shareholders' Fund units fell 3 cents to $4.68 in a widely weaker market. The NZX 50 was down 1.5 percent in early trading.


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