Australia, May 27 -- New South Wales Land and Environment Court issued text of the following judgement on April 28:

1. Fonterra Brands (Australia) Pty Ltd is part of a group of companies (Fonterra Group) ultimately controlled by Fonterra Co-operative Group Ltd (Fonterra). Fonterra Brands, and its wholly owned subsidiary, Bonland Cheese Trading Pty Ltd, bring these proceedings practically on behalf of the Fonterra Group.

2. Fonterra Brands and Bonland Cheese have the benefit of Bega Cheese trade marks under two licence agreements. They seek declaratory relief that, if the Fonterra Group is restructured and it divests itself of its Australian consumer business, including Fonterra Brands and Bonland Cheese, those steps will not trigger "change of control" clauses within the licence agreements.

3. Fonterra Group's proposal, the subject of the proposed declarations, is described as an internal reorganisation followed by a divestment of a head company controlling Fonterra Brands and Bonland Cheese. That divestment is expected to occur by way of a trade sale or an IPO. Fonterra Group seeks certainty as to the assets it can sell; if there is a risk that the Bega Cheese trade marks will not be able to be used by a buyer, then Fonterra Group has concerns that the likely price of any business sale will be jeopardised.

4. Bega Cheese Ltd resists the making of the declarations, primarily on the basis that the Court lacks jurisdiction to do so, because there is no certainty or "genuine controversy" as to the exact nature of the restructure and sale that may eventuate, and the declarations sought would amount to an advisory opinion without a concrete factual basis. Alternatively, Bega submits that, if the Court has jurisdiction, it ought not be exercised on discretionary grounds.

5. The issues are:

1) Does the Court have jurisdiction to make a declaration about whether the pleaded proposed transaction amounts to a "Change of Control Event" within the meaning of the licence agreements?

2) If so, should the Court exercise its discretion to make the declarations sought?

6. For the reasons that follow, I do not consider the Court has jurisdiction to make the declarations sought, and, even if it did, it would not be appropriate to exercise the discretion to do so.

Background

7. Fonterra is a co-operative company, owned and supplied by around 8,000 shareholding dairy farms across New Zealand. It is listed on the New Zealand Exchange.

8. Fonterra operates globally and is one of the largest producers of dairy products in the world. Its business involves the sale of milk solids for three main purposes: for use as ingredients in products such as powders and proteins (80%); for use in products sold to hospitality businesses (13%); and for use in everyday consumer dairy products, such as milk, cheese and butter (the consumer business) (7%). As part of its consumer business, Fonterra (through Fonterra Brands and Bonland Cheese) has the benefit of Bega's trade marks.

9. On 16 May 2024, Fonterra announced that it was exploring the proposed divestment of some, or all, of its global consumer business and its integrated businesses in Oceania and Sri Lanka. This was a change from Fonterra Group's long-term strategy that it had announced on 21 September 2021, where, in relation to the Australian business, it was "considering the most appropriate ownership structure for this business[;] one option is an IPO, with the intention that [Fonterra] retain a significant stake."

10. On 30 September 2024, Fonterra released a "revised strategy", which indicated that it was "exploring divesting options for our global Consumer businesses" and said "[i]t remains our intention to seek shareholder approval prior to divesting these businesses".

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/1965bdb0818a89a809095073)

Disclaimer: Curated by HT Syndication.