Fonterra,National Foods reach a deal over Aust yoghurt

Fonterra pulled out of the running to buy Sydney-based Dairy Farmers cooperative in September after announcing it had bought the rights to Nestle Australia's yoghurt and dairy desserts business.

Nestle's key yoghurt brand, SKI, is currently sold by Dairy Farmers, but its long-term licence to manufacture, market and sell the Nestle desserts will revert to Nestle in 2012 -- and pass directly to Fonterra.

The new conditional agreement would see Fonterra take over the licence and intellectual property of the yoghurt brand before 2012 should National Foods' $A910 million offer for Dairy Farmers be accepted when farmers vote on it later this year.

The conditions include a Dairy Farmers shareholder vote and regulatory approval.

The agreement would see National Foods continue to manufacture the yoghurt, on behalf of Fonterra, for the next two years.