Goodman Fielder's review of its New Zealand dairy business is most likely to result in a joint-venture partner who can help it increase exports to Asia taking a stake in the business, an analyst says.
The dairy business is one of the two big dairy players in New Zealand supermarkets and its brands include Meadow Lea, Naturlea, Chesdale and Tararua.
Citi Investment Research analyst Gino Rossi said he did not believe the trans-Tasman food giant would have much difficulty finding a joint-venture partner, and that that was a more likely option than selling outright.
"In terms of a joint venture partner, they seem very confident of finding a suitable partner. There's been a lot of interest in these dairy assets and so yes, I think they will have success on that front," Mr Rossi said.
Goodman Fielder wanted to crystalise the value of the dairy business, which Mr Rossi conservatively valued at $250 million.
"Management believe the market isn't adequately valuing the dairy business. I think it's been lost in the bread and grocery business problems and that the market is missing the value of the dairy business within the wider group," he said.
Last week, Goodman Fielder chief executive Chris Delany told analysts the company was aggressively looking for a joint-venture partner.
"We are getting very good growth out of our export business into Asia and we are working on growth agendas on how to accelerate that and increase it," he said.
"There's a level of that that we can afford ourselves today, in our current state, but if we were able to attract a partner who wanted to buy, for instance, a stake in that business, that would open up a significant opportunity to obviously go much, much faster in our export business into Asia."
That would particularly be the case if the business partner already had an existing footprint in Asia, Mr Delany said.
Mr Delany would not rule out selling the New Zealand dairy business altogether.
Consumer comment
Consumer says there could be a concerning lack of competition in the milk market if Goodman Fielder quits the dairy industry.
Goodman Fielder, which is the main competitor of Fonterra, is looking for a joint-venture partner to get a better foothold in the Asian market, and isn't ruling out selling the New Zealand business altogether.
Consumer's chief executive Sue Chetwin told Morning Report the Government might have to look at the issue, if Fonterra were left as a monopoly.
She said Fonterra is legislated to provide some milk to a competitor.
