Tip Top is likely to attract interest from local and international trade buyers as well as private equity firms after Fonterra confirmed the ice-cream business was on the market.
However, the iconic Kiwi brand is an unlikely candidate for a sharemarket float, investment sources say.
Fonterra announced the proposed divestment this week as part of an asset portfolio review and said while Tip Top was performing well, it had reached maturity as an investment for the co-operative.
"To take it to its next phase successfully will require a level of investment beyond what we are willing to make."
Those comments indicate significant capital investment is required to modernise Tip Top's ageing plant at its Mt Wellington headquarters, alongside the motorway south of Auckland, and grow sales here and offshore.
Investment bank FNZC is running the sale process and is understood to be sending out a term sheet for interested buyers next week.
The Herald understands Tip Top generates $18-$22 million in earnings before interest and tax (EBIT) per year. Businesses of this nature typically demand an EBIT multiple of around eight times, so that would suggest a price of about $180m, but there are other factors to consider.
Interested parties could include trade buyers such as Peters Ice Cream, an Australian brand now owned by European food firm R&R Ice Cream, which bought Peters from private equity firm Pacific Equity Partners (PEP) earlier this year.
Industry sources say local food company Talley's, from Nelson, is another potential trade buyer.
Talley's has built a multi-billion-dollar food processing empire that includes a three-quarter stake in Open Country Cheese, a Fonterra competitor.
It also has its own ice-cream division, with processing capability.
"If you are going to buy Tip Top, you really need a long-term view to rebuild the plant somewhere else and modernise it," one industry source said.
"It's a reasonable business that makes money but it's not going to be around forever unless someone rebuilds the plant or moves the manufacturing elsewhere."
Both Peters and Talley's have the advantage of being able to create synergies and have their own infrastructure, finance and administration teams.
According to one Fonterra insider, Tip Top's plant is run down and the equipment is getting towards the end of its useful life.
"The office block is new and looks good, but behind it is a mess."
An investment banking source doubted Fonterra would go down the initial public offer and sharemarket listing route because the co-operative would not want the attention that would involve - but also because it is likely to get a better price from a trade buyer.
"I doubt that the public market would pay the sort of multiple that they could probably get in the private market. An IPO has not even been entertained."
Agriculture economist Peter Fraser said Fonterra had little choice but to sell off assets given a hole in its balance sheet. Fonterra says it plans to reduce debt levels by $800m by the end of the financial year.
"Given the position they are in, I think they are making a reasonable call," he told Newstalk ZB.
"I'd love to see it [Tip Top] staying in New Zealand for iconic reasons, but I'd be surprised if an overseas firm was not part of the mix. That's simply for access to capital, access to markets and access to expertise."
Other potential buyers include private equity firms such as Australia's PEP, which has been active in the New Zealand market over the past decade. It recently sold premium honey producer Manuka Health after three years of ownership.