After dropping out of the $910m auction for Dairy Farmers last year, Parmalat has entered into a binding agreement to buy licences to market a portfolio of white and flavoured milk brands from National Foods, as well as processing facilities and distribution networks in South Australia, New South Wales and the Australian Capital Territory.

Parmalat, which outbid Murray Goulburn Co-op and Fonterra for the assets, is also a logical buyer of Fonterra's milk operations in Western Australia, where the New Zealand dairy giant is reviewing its Brownes milk business, and recently sold its ice-cream operations.

The acquisition of the National Foods brand licences will increase Parmalat's share of the white and flavoured milk markets in NSW and SA, while the acquisition of Fonterra's WA milk business would give Parmalat a national presence in the $8 billion dairy market.

The deal also boosts Parmalat's processing capacity in SA and NSW and might enable the company to close its valuable Brisbane milk processing property close to the CBD and shift more production to the southern states.

Parmalat, formerly known as Pauls, will pay National Foods $70m in cash, subject to adjustments, and assume certain liabilities in exchange for assets that generate annual sales of about $200m.

Parmalat mounted a joint bid with Murray Goulburn for Dairy Farmers last year but abandoned the joint venture after failing to agree on terms, following the Australian Competition & Consumer Commission flagging concerns over competition in flavoured and fresh milk in Queensland.

Parmalat's decision to quit the auction triggered speculation the Milan-based company would leave Australia, eight years after it acquired Pauls.

But bankers said Parmalat was obviously prepared to invest more funds in Australia where National Foods' acquisition of Dairy Farmers has led to industry rationalisation.