The deal, which is valued at around NZ$1.05bn (US$644m), comprises the sale of shares in a Fonterra-owned holding company and is subject to several conditions, including regulatory approvals from the competition authority in Chile and commencement of a public tender offer process for the company shares not already owned by Fonterra. The process of satisfying these conditions is expected to take six months, said the co-op.
Fonterra CEO Miles Hurrell said the divestment formally commenced in April 2022 following the launch of the co-op’s strategy to 2030.
He said: “A key pillar of our strategy is to focus on New Zealand milk. Soprole is a very good business but does not rely on New Zealand milk or expertise.
“We are now at the end of the divestment process and have agreed to sell Soprole to Gloria Foods.”
Proceeds received by Fonterra at completion from the sale of shares will be subject to relevant adjustments including capital gains tax, working capital and net debt adjustments at closing, foreign exchange hedging costs, and other transaction related costs. The aggregate consideration also includes the receipt by Fonterra, prior to completion, of dividends from Soprole and intercompany debt owing to Fonterra, which will be repaid at completion.
Peru-based Gloria Foods is a large consumer dairy player on the South American market, with operations in Bolivia, Puerto Rico, Argentina, Colombia and Uruguay. “Fonterra is delighted to pass on the Soprole business to a committed new owner with a strong regional focus on growth,” Fonterra said in a statement. “Soprole’s success over many years and its market-leading position across a number of dairy categories in Chile, has been built on the dedicated focus of Soprole’s management team and staff, and the support of its supplying farmers.”
Fonterra also announced it remains committed to ‘targeting a significant capital return to our shareholders and unitholders’, adding that the co-op’s board is set to make a final decision on the amount and timing of any capital return ‘once the sale agreement is unconditional, cash proceeds are received in New Zealand and having regard to other relevant factors including Fonterra’s debt and earnings outlook at such time.’
An overall impact of the divestment program will be revealed during the co-op’s FY23 earnings guidance, which will continue to reflect the underlying performance of Soprole during the pre-completion period.
Santiago-based Soprole is a leading consumer branded dairy company in Chile and is 99.9% owned by Fonterra. The co-op had previously announced plans to focus on New Zealand production, with CEO Miles Hurrell stating that 'New Zealand milk is the highest quality and most sought-after milk in the world. Our milk has a carbon footprint, one third the global average for milk production due to our grass-fed farming model.'
