NZ’s Fonterra sells Tip Top ice cream to Froneri for $250 million

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FILE PHOTO: The Fonterra Te Rapa dairy factory is seen outside Hamilton March 30, 2016. REUTERS/Henning Gloystein

(Reuters) – New Zealand dairy group Fonterra on Monday confirmed the sale of its Tip Top ice cream business to Froneri for NZ$380 million ($250.34 million), as the group looks to trim its portfolio and reduce debt by the year-end.

The world’s largest dairy company had said last year that it was considering options for Tip Top, and on Monday flagged several bids for the business.

The sale represents a gain of about NZ$100 million above book value, which would have a positive 6 cents-per-share impact on earnings, Fonterra said in a statement.

The dairy producer also said it had entered an agreement with Froneri to supply milk, and that the Tip Top name and its operations, including an Auckland-based factory site at Mount Wellington, will be maintained.

Froneri, which is based in the United Kingdom, is one of the largest ice cream makers in the world, with operations in about 20 countries.

Fonterra’s margins had recently come under pressure from a slowdown in milk production, owing to unnaturally hot weather across its key Australia and New Zealand regions. However, the company said earlier in the year that it was on track to reduce its debt by about NZ$800 million in fiscal 2019.

Froneri could not be reached for comment outside of business hours.

Reporting by Ambar Warrick in Bengaluru; Editing by Peter Cooney and Daniel Wallis