By Rebecca Howard
May 13 (BusinessDesk) - Global ice cream company Froneri has bought Fonterra Cooperative Group's Tip Top for $380 million, ending a six-month sale process.
The price was about $100 million above book value, which will lift earnings by six cents per share, Fonterra said.
The agreed settlement date is May 31. While there will be a transition period over a number of months, it will be "very much business as usual," and Tip Top employees will transfer across to become part of Froneri, Fonterra said.
Froneri also confirmed that the Tip Top business will continue to be led by the existing management team and the Tip Top name and its operations, including the factory in the Auckland suburb of Mount Wellington, will be maintained.
Fonterra announced the sale of assets no longer deemed core after reporting its first ever full-year loss last September. When it announced the business was for sale, Fonterra said it wanted Tip Top to stay based in New Zealand.
Chief executive Miles Hurrell said Tip Top's attractiveness - with an average 340 serves of Tip Top every minute - "came through in both the number and quality of bids we received." He said Fonterra had secured a good price for its farmers and unitholders.
“It’s been a privilege being the guardians of Tip Top, but it’s time to hand the baton to new owners. The well-loved brand needs continuing investment and focused ownership to be sustainable for generations to come. It’s not something we’re in a position to do right now," he said.
UK-based Froneri has more than 10,000 employees and operates in 20 countries.
Regarding other divestments, Hurrell said that, while Fonterra has "other one-off transactions that are underway but not yet completed, such as the potential sale of DFE Pharma, it is too early to assess the overall impact of the co-op’s divestment programme on its FY19 earnings."
In a separate statement, Froneri chief executive Ibrahim Najafi said Tip Top is an "iconic brand" in New Zealand.
"Our vision is to build the world’s best ice cream company; an important part of our strategy is to develop local market successes and roll them out across our other markets.”
Fonterra has signed an agreement with the new owners to supply milk to Froneri. It will retain full global ownership of the Kapiti brand and will be licencing its use for ice cream to Froneri.
Units in the Fonterra Shareholders Fund last traded at $4.28 and are down 25 percent over the past 12 months.