Bids close on Monday for Fonterra's Tip Top ice cream business but the sale process has been anything but smooth, according to sources close to the company.

It's understood potential buyers are not impressed by the state of the manufacturing plant, while due diligence has been complicated by Tip Top's integration with Fonterra, including the supply chain.

"It's pretty hardwired into the rest of Fonterra," an insider told Continuous Disclosure.

"There's quite a separation process that has to be done around IT systems, around warehouses, and they don't really have a finance team, HR team, or admin team. All those things need to be put back into it."

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That's creating a headache for some would-be buyers. But also, it's likely the manufacturing will have to move from the current site at Mt Wellington in Auckland, meaning trade buyers with existing processing capability are the most likely bidders at a price acceptable for Fonterra.

While the office block looks good, the plant needs significant investment, said one source who described it as a bit like "lipstick on a pig."

"It's a reasonable business that makes money but if you were going to buy it you would just buy the brand and make it somewhere else."

Fonterra has said one of the reasons it is selling the business is because it had reached maturity as an investment and to be successful would "require a level of investment beyond what we are willing to make."

As first revealed in this column, Tip Top generates $18-22 million in earnings before interest and tax per year on annual sales of about $150m.

Marketing material sent out by investment bank FNZC talks up Tip Top as a "unique opportunity to invest in an iconic New Zealand company with 80 years of heritage."

Tip Top's brand portfolio includes "super-premium" brand Kapiti, "indulgence" products such as Memphis Meltdown and Trumpet, "mainstream" products such as Choc Bar and Jelly Tip and a "refreshment" category that includes Fruju and Popsicle.

A report in the AFR this week suggested several bidders lining up, including BGH Capital, Quadrant Private Equity, Pacific Equity Partners and Adamantem Capital among the private equity firms.

Trade buyers include R&R Ice Cream, which bought Australia's Peters Ice Cream in 2014 from PEP.

The Australianalso reported this week that Australian packaging billionaire Raphael Geminder and Kiwi billionaire Graeme Hart were also potential buyers of the ice cream business.

Industry sources say Nelson-based food company Talley's is also in the frame, given that it has its own ice-cream division, with processing capability.