New Zealand’s Fonterra on Wednesday agreed to sell its 50% stake in DFE Pharma for NZ$633 million ($400.37 million) as the world’s biggest dairy exporter trims its overseas portfolio to focus on domestic business.
The cash from the sale, along with proceeds from other asset sales through the year including its Tip Top ice cream brand, will help the dairy firm to reduce debt by over NZ$1 billion at a time when it has written down several of its overseas assets.
DFE Pharma, Fonterra’s 50% joint venture with the Netherlands-based Royal FrieslandCampina, was sold to CVC Strategic Opportunities II, a fund managed by British private equity and investment advisory firm CVC Capital Partners.
“We set ourselves a tough initial target for debt reduction and we are pleased with the progress we are making,” said Fonterra Chief Executive Officer Miles Hurrell.
The sale price comprises a cash payment of NZ$537 million and an interest-accruing vendor loan of NZ$96 million for a term of up to 15 years.
Fonterra will continue its lactose supply to DFE Pharma, which primarily partners with pharmaceutical firms in developing pulmonary drugs.
Fonterra will report its delayed annual results on Thursday after taking extra time to finalize sizable writedowns of overseas assets. It is set to report its worst-ever annual loss of as much as NZ$675 million.