Fonterra sells its 50% stake in DairiConcepts to DFA

Fonterra Co-operative Group Limited has announced its plans to sell its 50 percent interest in DairiConcepts, the Co-operative’s US joint venture with Dairy Farmers of America (DFA).

DFA will purchase Fonterra’s 50 percent interest on 31 December 2015 for a price of approximately NZD 196 million.

The DairiConcepts partnership was established in 2000 when Fonterra contributed its US dairy/cheese flavours business and DFA contributed a number of cheese and cheese-powder assets. DairiConcepts is a manufacturer of cheese, dairy ingredients and dairy flavour systems with eight facilities across the US. It works with customers both in the US and around the world as a value-added supplier, committed to creating appropriate lower-cost, quality dairy ingredient solutions. Its dedicated team of professionals focuses on product formulation, testing and packaging, and has proven success in these areas.

Fonterra CEO Theo Spierings said that the transaction did not impact the longstanding relationship with DFA. Fonterra and DFA were both founding members of the Global Dairy Platform and had a shared interest in promoting the growth in global dairy consumption and the further development of co-operative dairy farming. Fonterra had decided to exit the partnership as it was considered to be a non-core component of its strategy.

‘Simpler’ if one partner bought DairiConcepts

Spierings commented, “We still value our relationship with DFA, however, as the DairiConcepts business is almost completely stand-alone operationally, we have agreed that it would be simpler for one of the partners to buy the other out.”

“The US remains a key part of our global multi-hub strategy and this divestment does not prevent Fonterra from exploring new growth opportunities for this milk pool.”

“A long-term supply agreement we have reached as part of the sale, means our US milk pool will continue to meet value add customer demand through our NZMP brand.”

Commenting on the transaction and the future of DairiConcepts, Rick Smith, DFA President and Chief Executive Officer, said, “Our relationship with Fonterra remains strong. DairiConcepts has historically generated strong returns for our farmer-owners, and we look forward to continuing to strengthen the business and expand markets for our members’ milk.”