New Zealand dairy giant Fonterra has sold its 50% share of joint-venture company DFE Pharma for NZD633m (US$400.3m) to a fund managed by UK private-equity firm CVC Capital Partners.
It said the sale, along with proceeds from other asset disposals across the year, will provide the cooperative with more than NZD1bn to cut debt.
The news comes a day before the embattled dairy group – the world’s largest dairy exporter – is due to report its delayed annual results after taking extra time to finalise writedowns of overseas assets.
Fonterra previously indicated it is set to report the worst-ever annual loss of as much as NZD675m. It is also expected that widescale job losses will be announced, along with new strategic plans.
Fonterra said in March it was planning to sell its stake in DFE Pharma, a Germany-based joint venture established in 2006 with Dutch dairy group FrieslandCampina which supplies ingredients such as lactose to the pharmaceutical industry for use in both dry powder inhalation and oral solid dose drugs.
The Kiwi co-op’s CEO Miles Hurrell said: “We set ourselves a tough initial target for debt reduction and we are pleased with the progress we are making. 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 re-evaluate every investment, major asset and partnership, to make sure they were still right for the co-op.
The NZD633m sale to the CVC Strategic Opportunities II fund is made up of a cash payment of NZD537m, payable on completion, plus an interest-accruing vendor loan of NZD96m for a term of up to 15 years. Built into the deal is a potential additional payment of as much as NZD44m based on DFE’s performance over two years.