The cash from this sale and proceeds from its other asset sales this year, which include the significant contribution from Tip Top, will give it more than $1 billion to reduce debt, chief executive 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.
“In March we advised that we were reviewing our share of DFE Pharma, a 50% joint venture with Royal Friesland Campina.
“DFE Pharma was identified for sale due to the substantial capital required for its future growth.
“We are now at the end of that process and have sold our share of DFE Pharma to CVC Strategic Opportunities II, a fund managed by CVC Capital Partners, a leading private equity and investment advisory firm,” he said.
It manages about US$83b of assets in 73 companies worldwide.
The $633m sale to CVC is made up of a cash payment of $537m, payable on completion of the sale, plus an interest-accruing vendor loan of $96m for up to 15 years.
Built into the deal is a potential extra payment of up to $44m based on DFE’s performance over two years.
Hurrell said Fonterra is pleased to have secured a good sale price and will stay committed to the ongoing success of the DFE Pharma business through a long-term supply agreement and the 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.
“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.” Hurrell said.
