Dairy company Fonterra and Rank Group Limited have reached an agreement that will return the Anchor Brand to Fonterra’s product range in New Zealand.

Under the agreement Fonterra will acquire a range of assets from New Zealand Dairy Foods including the Anchor Milk and Fresh’n’Fruity yoghurt brands and will sell its Meadow Fresh beverages and yoghurts and its Kiwi Meats businesses to NZDF, Fonterra said in an announcement to the New Zealand Stock Exchange.

“Anchor is one of our international power brands and this is a once only opportunity to regain the brand in our home market,” Fonterra chief executive Andrew Ferrier said today (Monday). “This is a strong move for Fonterra in New Zealand with good prospects for overseas expansion of our brand portfolio.”

The assets acquired by Fonterra from NZDF are valued at NZ$754m (US$522m), including NZDF’s branded butter business, and the assets acquired by NZDF from Fonterra are valued at $416m. Fonterra intends to apply for Commerce Act clearance to acquire NZDF’s branded butter business. The branded butter business will be purchased for $28m.

NZDF said it recognised the logic of Fonterra’s strategy in wanting to align its domestic brands with its international profile and while NZDF was acquiring a business with a lower profit base, it considered the Meadow Fresh and Kiwi Meats businesses to be very well run operations and well positioned in the New Zealand market.

Under the details of the agreement Fonterra will acquire most of NZDF’s assets (the principal exclusions being Puhoi Cheese and NZDF’s cheese business which will have use of the Anchor brand under a 10 year license). NZDF will acquire Meadow Fresh beverages, yoghurts, the Kiwi Meats businesses and the route (fresh milk deliveries) and food services and distribution networks. Fonterra will retain the Mainland cheese and export businesses.

The agreement sees Fonterra gain the rights to much of New Zealand’s Anchor branded products. Fonterra currently owns the Anchor brand outside New Zealand but Anchor in New Zealand was part of NZDF when it was sold to allow the merger that formed Fonterra to proceed.

Fonterra Brands managing director Sanjay Khosla said the Meadow Fresh and meats businesses are good performers and their strength was a key asset in this transaction.

“However, the purchase of NZDF assets provided a unique and strategic opportunity for Fonterra to achieve a much stronger alignment of its brands,” he said. “It’s also consistent with our strategy to be the number one or two player in all the categories in which we compete in our home market while aligning the global brand portfolio and providing further opportunities for off-shore growth.”

“With Fresh’n’Fruity we acquire a yoghurt business which is significantly larger than our existing yoghurt business, we also retain our Mainland cheese brand and pick up the Anchor milk brand in New Zealand,” he said. “Yoghurt, and cultured dairy products, are one of the fastest growing dairy categories worldwide. The Fresh’n’Fruity brand mix has potential to be applied in markets outside New Zealand. Along with the Fresh’n’Fruity brand, we are also acquiring key yoghurt manufacturing capabilities in New Zealand that we don’t have currently.

“The acquisition of the Anchor brand in New Zealand means we can also align the domestic business to the Anchor brand we operate worldwide.”

Most employees would transfer with the respective companies. About 1500 current Fonterra employees are likely to become part of NZDF with about 800 NZDF employees becoming part of Fonterra.

“Looking after the interests of these employees and ensuring a smooth transition is a priority for both companies,” Khosla said. “While the aim was to carry on business as usual during the complex transaction, customers of the current operations would be contacted to talk through the details of the agreement.”

Once completed the Fonterra brand portfolio will include: Fresh’n’Fruity, Metchnikoff, De Winkel, Swiss Maid, Sponge Bob Squarepants, Slimmers’ Choice yoghurts; Country Goodness cultured dairy; Anchor, Primo, Supashake, Fru Ju and Zing beverages; Mainland, Valumetric, Perfect Italiano, Ferndale and Galaxy cheeses; and Mainland spreads.

The NZDF brand portfolio will include Meadow Fresh, Weightwatchers and Naturalea yoghurts; Meadow Fresh, Naturalea and Nature’s Energy beverages; Tararua cultured dairy; Anchor Cheese (under license), Chesdale, Ornelle, Puhoi and Bouton d’or cheeses; and Kiwi, Huttons and Top Hat meats.

The parties expect the transaction, other than in relation to branded butter, to be completed on 31 August.