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Fonterra and Nestle realign South American joint venture

New Zealand diary giant, Fonterra and Nestle have realigned their Dairy Partners Americas (DPA) joint venture and signed binding agreements covering the revised scope of the 10-year old partnership.

Set up in 2003, the partnership is the largest of its kind in South America, purchasing and processing over two billion litres of milk in Brazil alone.

The agreements, which were signed today in Sao Paulo Brazil, will see Fonterra take a 51 percent controlling stake in DPA Brazil, with Nestle holding the remaining 49 percent.

The deal will also cover the following:

  • Fonterra and its local partner acquire Nestle’s share of DPA Venezuela, and will continue to operate the business as a joint venture
  • Fonterra will sell its share in DPA’s milk power manufacturing business to Nestle and Nestle will buy Fonterra’s share in Ecuador
  • The DPA Brazil business will become focussed primarily on chilled dairy products, sold under Nestle brands.

CEO of Fonterra, Theo Springs, says that the DPA joint venture has performed well over the past 10 years, however the re-alignment of the partnership better reflects the respective strategies of Nestle and Fonterra in the region.

“We value our relationship with Nestle and this high-quality agreement will see our successful alliance continue,” Springs said in a statement to the ASX.

“The deal also enables the co-operative to drive more long-term value for its farmers and investors.”

Alex Turnbull, Fonterra’s managing director of Latin America says: “The region’s economies have undergone considerable change during the past 10 years,” says Turnbull.

“…A bigger stake in DPA Brazil means we will be extremely well placed to drive our volume and value growth strategy focusing on everyday nutrition offerings.”

“We are very proud with what we’ve achieved through the DPA alliance with Nestle and look forward to continuing to work together with a renewed focus,” says Turnbull.

Changes to the joint venture are subject to regulatory approval, along with other customary conditions. Both parties expect the transactions to be completed by the end of 2014 and Fonterra expects to receive a net cash payment of around NZ$96m from the interrelated transactions.

 

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