Fonterra said it would sell its Australian yoghurt and dairy dessert business to Parmalat Australia.
Both parties entered into exclusive negotiations which have now culminated in the signing of a sale agreement. Fonterra did not disclose the sale price.
The transaction, which is conditional on regulatory and other approvals, is expected to be completed in the first half the of the 2016 calendar year.
The divestment of its Australian yoghurt and dairy desserts business, which includes manufacturing sites at Tamar Valley and Echuca as well as its Australian yoghurt and dairy dessert brands, is part of a comprehensive plan to return the Co-operative's Australian business to strong and sustainable profitability, Fonterra said.
Fonterra has in recent months been making changes to its Australian operations, which have struggled to perform.
In recent months, it has:
* Decided to invest $120 million investment to rebuild its factory in Stanhope, in northern Victoria, as a state-of-the-art primary cheese manufacturing plant, with 50 per cent extra capacity.
* Divested its 9 per cent stake in Bega, with the funds being re-invested into the Stanhope cheese plant.
* Announced plans with Bellamy's Australia Ltd and China's Beingmate Baby and Child Food Company Ltd that provide opportunity for significant growth in nutritional volume from Fonterra Australia.
* Commissioned a multi-million dollar beverages plant at its Cobden facility, in western Victoria, to service a 10 year partnership with Woolworths.
* Launched Fonterra's largest global brand, Anchor, in Australia.