Debt-laden dairy co-op Fonterra said it had sold its 50 per cent share of DFE Pharma for $633 million to a private equity fund, CVC Strategic Opportunities.

Fonterra said cash from this sale, along with proceeds from our other asset sales across the year, would make over $1 billion available for debt reduction.

The market's reaction was mildly positive, with the NZX-traded units firming by 3c to $3.24.

"It was a positive reaction but there is more to be done," Harbour Asset Management portfolio manager Shane Solly said.

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"In aggregate, it's probably a better dollar value than people had expected," he said.

"It does give them some financial breathing room for the business," he said.

"There are more things to be done and the board and management seem to be getting on with it," Solly said.

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Chief executive Miles Hurrell said the co-op had set itself a tough debt reduction target but was pleased with the progress being made.

"It's an important milestone in our Co-op's plan to lift our business performance," Hurrell said.

Fonterra said in March that it was reviewing its share of DFE Pharma, a 50 per cent joint venture with Royal Friesland Campina of the Netherlands.

DFE Pharma was identified for sale due to the substantial capital required for its future growth, it said.

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CVC Capital Partners is a leading private equity and investment advisory firm, managing US$83 billion of assets in 73 companies worldwide.

The $633m sale is made up of a cash payment of $537m, payable on completion of the sale, plus an interest-accruing vendor loan of $96m, for a term of up to 15 years.

Built into the deal is a potential additional payment of up to $44m based on DFE's performance over two years.

The sale is subject to receipt of regulatory approvals from competition authorities.

Hurrell said that Fonterra was pleased to have secured a good sale price and would stay committed to the ongoing success of the DFE Pharma business through a long-term supply agreement and the interest-accruing vendor loan.

Hurrell said a big part of the success of DFE Pharma had been the high-quality lactose produced by the team at Fonterra's Kapuni site in Taranaki. Fonterra will continue to supply lactose to DFE.

"This milestone, along with the significant inroads made in our capital and operational expenditure during FY19, makes for a good initial chapter in our business turn-around," Hurrell said.

"It puts us on the right footing to deliver our new strategy and a sustainable lift in our performance," he said.

Fonterra is due to report its annual result on Thursday, having already postponed its release from earlier this month.

The co-op has said that it expects to report a loss of $590-675 million for the year to July 31.

Earlier this month, ratings agency S&P Global said Fonterra had "lost its way" over the past seven years and governance factors had contributed to a "widespread misallocation of capital".

However, S&P credit analyst Graeme Ferguson said in a report that the co-op did have a credible deleveraging plan and that its strategic review would result in the more disciplined allocation of capital.

Fonterra said the sums involved were based on a Euro to NZ dollar conversion rate of 1.7475.

Goldman Sachs New Zealand Limited acted as exclusive financial advisor, and Russell McVeagh and HVG Law as legal advisors to Fonterra.

FrieslandCampina was advised by Allen & Overy, and CVC Capital Partners by Rothschild & Co, Freshfields Bruckhaus Deringer and KPMG.