Sell-off talks for Brazilian joint venture continue
Fonterra remains in talks to sell its holding in DPA Brazil — a joint venture with Swiss food giant Nestle Sa — three years after its possible divestment was first flagged.
The co-op sold Chilean food group Soprole last month, for just over $1 billion, to Peru’s Gloria Foods.
Fonterra’s board intends to make a final decision on the amount and timing of a capital return once the sale becomes unconditional.
The co-op’s chief executive Miles Hurrell said the DPA sale process had been delayed by Covid-19 disruption and “distance”.
“The process is still under way and we are in discussions at the moment,” Hurrell told the Herald yesterday at Fieldays.
DPA is the last of a series of assets that Fonterra earmarked for sale when it undertook a strategic reset, which entailed the co-op divesting several non-core assets.
Hurrell said “any good organisation” will have a portfolio view — moving in new assets and potentially moving old assets out.
“It’s our job to make sure we don’t become static in that space,” he said.
Fonterra has been divesting noncore foreign assets over the last three years. In 2019, it sold icecream maker Tip Top to Froneri, a joint venture between Nestle and PAI Partners for $380m.
In 2020, it offloaded stakes in DFE Pharma and Foodspring for $623m.
The company has exited its investments in China Farms and its minority stake in China’s Beingmate.
Alongside asset sales, Fonterra has been refocusing its strategy of maximising the value of its New Zealand milk, taking on a greater customer focus, and on strengthening its balance sheet.
Nestle and Fonterra signalled in 2019 that they would review strategic options for their Dairy Partners Americas (DPA) business.
At the time Nestle was streamlining its portfolio and was divesting several underperforming businesses.
The partners created DPA as a 50:50 joint venture in 2003 to manufacture and commercialise chilled and liquid dairy products in Latin America.
The JV was realigned in 2014 to focus on chilled dairy in Brazil, with Fonterra taking a 51 per cent stake and Nestle holding the remaining 49 per cent.