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Fonterra’s farmers have voted strongly in favour of the sale of its Mainland consumer and related businesses to France’s Lactalis for $4.22 billion.

The co-op said 88.47% of the total farmer votes were in support of the sale.

Voting, which started on October 7, closed today at a special meeting.

The co-op is targeting a tax-free capital return to farmers of $2 per share from the transaction.

Analysts estimate the deal is worth about $400,000 in total for an average farmer.

The sale, which includes long-term agreements for Fonterra to sell milk and ingredients to Lactalis, is expected to go through in the first half of next year.

Chairman Peter McBride said the board and management team were encouraged by the level of engagement from farmer shareholders in the lead-up to the vote.

The transaction covers Fonterra’s global Consumer business (excluding Greater China) and Consumer brands; the integrated Foodservice and Ingredients businesses in Oceania and Sri Lanka; and the Middle East and Africa Foodservice business.

The deal involves the sale of some of Fonterra’s most recognised brands, including Anchor and Mainland.

McBride said the board was pleased to have received a strong mandate.

He said the decision to divest the Mainland Group businesses is significant and one the board did not take lightly.

“The divestment will usher in an exciting new phase for the Co-op.

“We will be able to focus Fonterra’s energy and efforts on where we do our best work.

“We will have a simplified and more focused business, the value of which cannot be overstated.”

Fonterra has said the capital tied up in its consumer businesses would be better directed to its Ingredients and Foodservice businesses, which offer superior returns.

While $3.2b will be returned to farmers, Fonterra aims to retain about $1b to invest over the next three to four years in projects to generate further value through its remaining Ingredients and Foodservice businesses.

Fonterra ran a “dual track” process for sale - the options being a trade sale or an initial public offer (IPO).

McBride said the sale price “exceeds all of the initial independent valuations and estimates”.

“It is also significantly value accretive when compared with an IPO,” he said in materials prepared for today’s meeting.

Post sale, Fonterra is targeting:

• An average return on capital of 10-12%.

• Maintaining the highest sustainable farmgate milk price.

• Earnings to be back at 2025 levels within three years, offsetting the earnings impact of divestment.

• Returning more of the co-op’s earnings to shareholders, through a dividend policy of 60-80%.

The Lactalis deal attracted some political pushback, and some unfavourable letters to the Herald.

One critic, Foreign Minister Winston Peters, said the deal was “utter madness”.

"It is economic self-sabotage,“ Peters said on the social media platform X, formerly known as Twitter.

“This is an outrageous short-sighted sugar hit that is just giving away New Zealand’s added value to a company from a major EU country,” he said.

Fonterra was formed in 2001 after farmers voted in favour of merging the New Zealand Dairy Board, New Zealand Dairy Group and Kiwi Co-operative Dairies.

Since then, the co-op’s performance has been mixed, and punctuated by ill-advised investments such as a stake in China’s Beingmate for $755m, which was later sold at a big loss.

However, a slimmed-down Fonterra - courtesy of a number of big asset sales worth in total around $7b (including Mainland) - has performed better in recent years.