Glanbia is to sell a 60% stake in its Irish dairy ingredients arm in a bid to divert resources to more attractive parts of its business.

The company plans to form a joint venture with its majority shareholder, the Glanbia Co-operative Society, to run what it said is the largest dairy ingredients supplier in Ireland.

Glanbia will retain a 40% stake in the business but said the deal would help it direct “financial resources … towards business segments that deliver the highest return on capital for all shareholders”.

The group also has operations in the US cheese sector and supplies ingredients to companies including infant formula firms, cereal manaufacturers and sports products for athletes.

The agreement over the venture comes two years after the farmer owners of the co-op rejected Glanbia’s plans to sell its entire Irish dairy business, including its consumer products unit, to its majority investor.

Glanbia MD John Moloney, who had said publicly it was a “big disappointment” that that deal had not gone through, said today the agreement on the dairy ingredients arm would create “an exciting new business model for post-quota growth in Irish dairy processing”.

The announcement of the venture came as Glanbia reported its half-year results. It admitted the performance of its Irish dairy ingredients business was “behind” the year before amid a fall in global dairy prices. Sales dropped and margins were hit as declines in raw material costs lagged the decrease in prices of dairy commodities.

Nevertheless, the company said the venture would help “facilitate the expansion of dairy processing in Ireland in advance of EU milk quota abolition in 2015”. It said the long-term outlook for global dairy markets was “positive” and added the venture, to be called Glanbia Ingredients Ireland, would expand dairy capacity by 60%. Last week, Glanbia confirmed it had received planning permission to build a milk processing plant in Ireland.

Separately, Glanbia’s co-op owner is looking to reduce its shareholding in the company from 51.4% to 41.4%. The co-op will put both the plans for the venture and the move to cut its stake in Glanbia to its members.