Fonterra has agreed to offload its 50% stake in DFE Pharma, a joint venture with Friesland Campina, for NZD 633 million ($401 million).
The cash from the sale, along with proceeds from other asset sales across the year – which includes the contribution from ice cream business Tip Top – will give Fonterra more than NZD 1 billion ($633.5 million) available for debt reduction.
Fonterra advised in March that it was reviewing its share in DFE Pharma, a supplier of pharmaceutical excipients, as part of plans to reduce debt. The divestiture comes after the New Zealand cooperative recorded its first annual loss last year.
The 50% stake in DFE Pharma will be bought by CVC Strategic Opportunities II, a fund managed by CVC Capital Partners – the private equity firm that secured a deal to buy Bosch’s packaging machinery division in July.
The sale is made up of a cash payment of NZD 537 million ($340.2 million), payable on completion of the sale, plus an interest-accruing vendor loan of NZD 96 million ($60.8 million), for a term of up to 15 years. Built into the deal is a potential additional payment of up to NZD 44 million ($27.9 million) based on DFE’s performance over two years.
“We set ourselves a tough initial target for debt reduction and we are pleased with the progress we are making,” said Fonterra CEO Miles Hurrell. “It’s an important milestone in our co-op’s plan to lift our business performance.
“A year ago, we started a full portfolio review to reevaluate every investment, major asset and partnership, to make sure they were still right for the co-op.
Hurrell added that Fonterra was pleased to have secured a good sale price and will stay committed to the success of DFE Pharma through a long-term supply agreement and the interest-accruing vendor loan.
“A big part of the success of DFE Pharma has been the high-quality lactose produced by the team at Fonterra’s Kapuni site in Taranaki and it is a good outcome to be able to continue to supply this,” he said.
“This milestone, along with the significant inroads made in our capital and operational expenditure during FY19, makes for a good initial chapter in our business turnaround. It puts us on the right footing to deliver our new strategy and a sustainable lift in our performance.”
© FoodBev Media Ltd 2021
World Beverage Innovation Awards – NOW OPEN FOR ENTRIES!
The awards celebrate excellence and innovation across the global beverage industry.
Don’t miss out on having your innovations recognised on a global scale.
Deadline for entries 23 July – enter now!
Don’t get left behind
Start your free Foodbev magazine trial today and join thousands of fellow industry professionals in receiving food and drink trends direct to our business.
Click here to start your free trial