Potential buyers have already approached New Zealand dairy giant Fonterra for Australian assets it must sell off if it takes over Australian milk company National Foods, according to the New Zealand Herald newspaper.

Fonterra spokesman John Redwood confirmed "some expressions of interest'' in the fresh milk business of West Australian subsidiary Peters & Brownes, the paper said. One investment banker told the Business Herald that Fonterra's adviser on the takeover bid, Credit Suisse First Boston, was running a sales process.

However, a source said the investment bank had merely responded to inquiries generated by publicity and no formal process existed. Likewise, Redwood said the calls had been incoming.

Fonterra gave undertakings in January to the Australian Competition and Consumer Commission that it would divest the Brownes brand - covering fresh white and flavoured milks, cream, yoghurts and desserts - if the takeover succeeded.

One of the other pledges was to offer to sell the milk supply, processing and distribution arrangements needed to support the brand.

Redwood did not know the size of the parts that Fonterra would be required to sell. Nor could he say whether the potential buyers wanted just those assets - or the lot.

No comment was available from Peters & Brownes chief executive Nigel Thomas in Australia.