The news comes after Lactalis agreed to conclude a seven-year licensing agreement with the competition authority in Brazil, reports DairyReporter.

The completion of the transaction, valued at around $140.5 million at current exchange rates, means that the joint venture previously held by the New Zealand dairy cooperative and the Swiss food group is now under the control of Lactalis Brasil.

However, to obtain regulatory approval, the new owner of the JV had to address several competition-related issues.

While Lactalis, Fonterra, and Nestlé reached an agreement for the sale of DPA Brazil in December 2022, in August 2023, the investigative arm of Brazil's competition authority CADE recommended blocking the deal due to "probable competition concerns related to horizontal effects on the chilled dairy market.

Specifically, CADE suggested that the merger would result in a horizontal overlap in milk collection in the states of Pernambuco, São Paulo, Paraná, and Minas Gerais, while vertical integrations would also allow DPA to access milk, powdered milk, and powdered whey supplied by Lactalis to manufacture its own products.

Competition in segments such as fermented milk, petit suisse, and dairy desserts would be particularly affected by the merger, while the production of yogurt, cream cheese, and milk has not proven to be under such a threat.

Lactalis argued against these competition concerns due to the "strong rivalry in the markets involved," including from national players Danone and Vigor, Yakult in the fermented dairy sector, and regional players such as Tirol, Frimesa, and Frutap.

But CADE, which is also responsible for approving mergers and acquisitions, found only a small number of competitors in the market and concluded that they had a "limited capacity to challenge the market power resulting from the transaction."

To overcome the agreement, Lactalis agreed in October 2023 to conclude a licensing agreement – the so-called concentration control agreement or ACC – with CADE regarding the marketing of the three segments that the body was most concerned about - fermented milk, petit suisse, and dairy desserts. The agreement is for a period of seven years, which can be extended for another three, at the discretion of the regulatory authority, and involves licensing the Batavo and Batavinho brands to Tirol.

Commenting on the competition sale, Fonterra CEO Miles Hurrell said, "By deciding to focus on our New Zealand milk fund, selling DPA Brazil means we can prioritize resources to businesses that are essential to our strategy."

In other news, Fonterra's Chief Financial Officer, Neil Beaumont, is leaving the business, the cooperative announced. Beaumont joined Fonterra in February 2023 and will leave the business on November 3.

Fonterra declined to provide further information about the nature of the CFO's departure when approached by DairyReporter.

The announcement surprised industry insiders, given its abrupt and unexplained nature. Fonterra recently reported favorable financial results, recording a 170% increase in net profit.

Beaumont will be temporarily replaced by Simon Till, the cooperative's director of capital markets, while a permanent CFO is recruited.

With this move, it is possible that very soon, Lactalis will become the world's largest milk processor.