Expert Says Fonterra Backing Current Strategy With New CEO Appointment
The appointment of Richard Allen as Fonterra's new chief executive signals execution, not strategy, according to agribusiness expert Dr Nic Lees.
The business has been sold to South American dairy giant Gloria Foods the divestment comprises a number of transactions.
Fonterra had earlier signalled its intention to offload the Chilean business and review the ownership of its Australian business as part of a plan to return $1b to farmer shareholders and unit holders.
Fonterra chief executive Miles Hurrell, says that the divestment process for the Soprole business formally commenced in April 2022, following the launch of Fonterra’s strategy to 2030.
“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.”
Gloria Foods is a consumer dairy market leader in Peru, with operations in Bolivia, Puerto Rico, Argentina, Colombia and Uruguay. Fonterra and Gloria Foods have a long-standing commercial relationship in South America.
The divestment comprises the sale of shares in a Fonterra owned holding company. 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.
The divestment is subject to a number of conditions including regulatory approvals in Chile and could take six months to finalise.
Hurrell says that Fonterra has a long history in Chile and is pleased to have reached agreement with Gloria Foods, which also has a proud dairy history in South America.
Fonterra is delighted to pass on the Soprole business to a committed new owner with a strong regional focus on growth, he says.
“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.”
Hurrell says Fonterra remains committed to targeting a significant capital return to shareholders and unitholders.
The Fonterra board intends 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 the time.
