KEY POINTS:
Both Fonterra and Australian company Dairy Farmers are trying to keep a lid on takeover talk which has been tipped by analysts.
Dairy Farmers plans to float its manufacturing and marketing division, Australian Co-operative Foods, next year but speculation reported in the Australian Financial Review has suggested a
likely buyer will pre-empt an IPO.
Analysts said the probability was that the Australian farmer co-operative would be bought before it completed a listing, with Fonterra among the hunting pack.
A Fonterra spokeswoman said there had been rumours and speculation in the market about Dairy Farmers for some time.
"We are not going to comment on this speculation," she said.
"Fonterra is focused on a range of organic growth opportunities in Australia and we will look at any consolidation opportunities that come up."
One senior industry observer here said an acquisition of Dairy Farmers before a float sounded plausible.
"Anybody that talks as far ahead about an IPO as they have is really inviting other people to come to the party beforehand," he said.
Strategically, Fonterra had to look at being the dominant presence in Australasia rather than just New Zealand, he said.
"It would be a terrible shame if Fonterra weren't able to be part of the consolidation that's got to happen in the Australian dairy equity market."
Fonterra failed in 2005 to take over the market leader National Foods, for which it had been prepared to pay almost $2 billion.
The dairy giant was eventually out-bid by San Miguel, to which it later sold its 19.9 per cent stake for about A$250 million ($291 million).
Fonterra processed about 21 per cent of total Australian milk supply and generated revenue of about A$1.9 billion ($2.21 billion) from its operations there.
A spokesman for Dairy Farmers said a float before next June was the preferred option.
"However, as any board would, Dairy Farmers will evaluate all options that lie ahead of us at that point in time to determine which stands to provide maximum value for shareholders," he said.
The company was squarely focused on its own agenda. "We're now seeing signs emerge that our business transformation is largely complete," he said.
"For example, Dairy Farmers exited fiscal 2007 growing its share of every dairy category in which we operate, at a rate faster than both the market and that of many competitors."
Dairy Farmers, with well known brands including OAK, moove and dare, had an annual turnover of A$1.3 billion ($1.5 billion).
Fonterra's annual meeting takes place tomorrow.
DAIRY TARGET
* Fonterra is on a short list of contenders tipped as likely buyers of Australian company Dairy Farmers.
* Other contenders may include Goodman Fielder, National Foods, Nestle and Coca-Cola Amatil.
* Fonterra says it will look at opportunities as they arise, but would not comment on speculation.