Fonterra, the largest multinational dairy company in New Zealand, said it has reached an agreement with Saudi-based Sadafco for acquisition of Saudi New Zealand Milk Products, a joint-venture dairy manufacturing facility in the Kingdom.

As per the pact, the company will purchase a 51 per cent stake in the Saudi facility for NZD45 million ($32.4 million). Fonterra already holds a 49 per cent stake in the Saudi company.

The deal will see Fonterra take full ownership of the factory, securing its current manufacturing capacity requirements for Middle East, Africa (MEA) and Commonwealth of Independent States (CIS) region and allowing for further expansion and investment.

The new deal is however subject to local regulatory approvals in Saudi Arabia, said a top company official.

Amr Farghal, managing director of Fonterra MEA and CIS said, 'We have great confidence in the stability and the positive outlook of the GCC economies. The Middle East, Africa and CIS accounts for around 20 per cent of sales in the Asia Middle East consumer division, and is one of our key focuses for expansion.'

He said the wider Middle East region was strategically important for Fonterra. “This investment will help us further grow our business, bringing New Zealand standard high quality raw milk ingredients, manufacturing expertise and new products to the region,” he added.

The manufacturing site was first established by Fonterra and Sadafco in 1996, and has been managed by Fonterra since then. It currently packs Anchor and Anlene milk powders and produces processed cheese and recombined feta-style white cheese for Fonterra, supplying 20 countries in the region.

With full ownership, Fonterra is expecting to increase production to meet demand growth in Saudi Arabia and around the region.

“Saudi Arabia is the cornerstone of our business in the GCC, and will continue grow with more investment, the introduction of value added products and strengthening Fonterra’s presence on the ground.”

Farghal said the investment was timely given the recent conclusion of negotiations between New Zealand and the GCC for a Free Trade Agreement. “We expect the free trade agreement to encourage more investment from New Zealand companies in the region,” he said.

Fonterra’s consumer brands business in the Middle East and Africa covers more than 20 markets and is based on strong partnerships with key distributors.

Anchor full cream milk powder and cheese products are the most widely known products amongst consumers, while Anchor cream, butter and feta cheese are sold through the foodservice industry.-TradeArabia News Service