New Zealand-based dairy co-operative Fonterra has agreed to buy milk producing assets of New Zealand Dairies Ltd.

The Russian-owned dairy factory at Studholme was placed into receivership in May, and bids were invited for bids to buy the business. It was processing 150 million litres of milk a year into powders for export. The terms of the offer were not revealed.

The acquisition, which is subject to Commerce Commission clearance, would result in NZDL’s existing farmer suppliers being paid in full by the receivers and being able to have their milk processed and paid for from the start of the new dairy season which commences in a few weeks.

Chief executive of Fonterra Theo Spierings said the acquisition ensures that the plant near Caterbury continues to operate and its farm suppliers have certainty that they will be able to sell their milk on a commercial basis from the start of next season.

“The Studholme plant is processing around 150 million litres of milk a year into milk powders for export,” Spierings said.

“It will complement our new Darfield plant which is due to start taking milk in August.

“Our Strategy Refresh has clearly identified the importance of growing milk volumes and optimising our New Zealand manufacturing operations.  This transaction helps deliver on that priority.”

As part of the agreement, NZDL’s existing suppliers have been offered the opportunity to supply Fonterra on contracts, which will enable them to become Fonterra fully share backed after the 2012/2013 season and require them to be shareholders within six years.

Fonterra plans to operate the Studholme plant up until the end of the 2012/2013 season pending a decision by the Commerce Commission on Fonterra’s clearance application.

“This means that we are able to collect and process farmers’ milk from the start of the new season, avoiding the prospect of them having to spill milk,” Spierings said.

“The solution we’ve developed with the receivers will mean that suppliers who continue to supply NZDL have a tanker coming up their driveway to take their milk and ensures they still have an income.

“It also means we are able to provide for continued employment to many of NZDL’s staff during this period.”