- Fonterra has agreed to sell its 50 per cent stake in DFE Pharma to CVC Strategic Opportunities II, for NZ$633 million
- This sale, and proceeds from other asset sales across the year, will give the company over $1 billion for debt reduction
- Fonterra did not have the means to fund the required capital for future growth
- It is now in the right direction to lift its business performance
Fonterra has agreed to sell its 50 per cent share in DFE Pharma for NZ$633 million.
The cash from this sale, as well as the proceeds from other asset sales across the year, will give the company over $1 billion for debt reduction.
Significant proceeds came from Fonterra’s decision to sell its New Zealand Tip Top ice cream business to U.K-based Froneri for NZ$380 million.
The Tip Top brand is over 80 years old and was incorporated into Fronterra’s portfolio back in 2001.
The sale largely stemmed from slowdown in milk production across Australia and New Zealand – leading the company to trim its asset portfolio and focus on international markets.
Fonterra CEO Miles Hurrell is reportedly pleased with the company’s progress in lifting its business performance.
“A year ago, we started a full portfolio review to re-evaluate every investment, major asset and partnership, to make sure they were still right for the Co-op,” Miles said.
In March 2019, the dairy company advised its intention to review its stake in DFE Pharma. It concluded that in order for DFE Pharma to grow, substantial capital was required.
Fonterra sold DFE Pharma to CVC Strategic Opportunities II, a fund managed by CVC Capital Partners. CVC manages approximately US$83 billion of assets in 73 companies across the globe.
The $633 million sale is made up of a $537 million cash payment, plus an interest-accruing vendor loan of $96 million, for up to 15 years.
Built into this deal is a potential additional payment of up to $44 million based on DFE’s performance over two years.
“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 turn-around,” Miles concluded.
The company is confident it’s in the right direction to deliver its new strategy and lift its business performance.