The UK-based buyer of Tip Top has skirted Overseas Investment Office approval by purchasing the business through an Australian subsidiary.

Fonterra has sold the ice cream business to Froneri, which was created in 2016 by Nestle and UK ice cream company R&R – owned by French private equity firm PAI Partners.

Key Points:

• Tip Top sold for $380m
• Fonterra books $100m gain on book value
• Deal to add 6c a share to Fonterra earnings
• Tip Top management keep their jobs


The purchase price was confirmed as $380 million, which would normally require OIO approval when transacted by UK and European investors.

However, Froneri can side-step that because there are exemptions for Australian investments in New Zealand businesses whereby the threshold is lifted to $530m.

"Froneri is acquiring Tip Top through its Australian Peters ice cream business, which allows it to rely on this exemption," a Fonterra spokeswoman said.

Fonterra announced the proposed divestment of Tip Top in December as part of an asset portfolio review and as the co-op seeks to reduce its debt by up to $800m.

While Tip Top was performing well, it had reached maturity as an investment for the co-operative.

Fonterra chief executive Miles Hurrell said the sale price represents a gain of around $100 million above book value, which will lift earnings by six cents a share. The deal is due to settle on May 31.

One analyst questioned the outcome, arguing that Fonterra was exiting a good business due to poor investment decisions.

"Fonterra should be focusing on their brands and it is disappointing that strategically they are having to dispose of one with the franchise value that Tip Top has," Slade Robertson of Devon Funds said.

Focus Live earlier: Fonterra sells Tip Top to dairy giant Froneri

New Zealand First primary industries spokesperson Mark Patterson said the news was disappointing. "If we are to build a value-added future for our economy, keeping the ownership of brands like Tip Top in Kiwi hands is critical," he said.

Hurrell said it was a bittersweet moment for the New Zealand dairy giant and no New Zealand buyer came forward with the right terms and conditions.

He acknowledged Tip Top is an "iconic brand in NZ and it is hard" when a brand is sold to an offshore buyer.

The Tip-Top factory beside the Southern motorway at Mt Wellington.
The Tip-Top factory beside the Southern motorway at Mt Wellington.

"Since we took ownership of Tip Top in 2001, a lot of work has gone into ensuring it remained New Zealand's leading ice cream company. Over that time, we've had strong support from New Zealanders, and I want to recognise and thank them for that.

"Tip Top has always listened to consumers and cared about their changing tastes, as well as their long-time favourites. An average of 340 serves of Tip Top are enjoyed every minute of every day.

"This came through in both the number and quality of bids we received. It's a fantastic brand and as a result, we've secured a good price for our farmers and unit holders."

While there will be a transition period over a number of months, it will be "very much business as usual" and Tip Top employees will transfer across to become part of Froneri, Fonterra said.

Froneri CEO Ibrahim Najafi says the Tip Top name and its operations, including the Auckland-based factory site at Mount Wellington, will be maintained.

"Our vision is to build the world's best ice cream company; an important part of our strategy is to develop local market successes and roll them out across our other markets."

Fonterra has signed an agreement with the new owners to supply milk to Froneri.

Hurrell couldn't disclose the terms of the milk supply deal but said "it's a long agreement".

Fonterra will retain full global ownership of the Kapiti brand and will be licencing its use for ice cream to Froneri. Hurrell said that the Kapiti brand pre-dates Fonterra's foray into ice cream.

"We see value in that brand through the cheese and liquid milk market and so that will continue."

Tip Top has had several different owners over the years, after starting off as an ice-cream parlour in Wellington in 1936.

By 1962, its Mt Wellington plant had become the Southern Hemisphere's biggest ice-cream factory.

Two years later, Tip Top had expanded and a parent company - General Foods - was formed.

The company went to Goodman Fielder in 1987, Heinz in 1992, West Australia's Peters and Brownes in 1997, Kiwi Dairy Co in 2000, and to Fonterra in 2001.

- Additional reporting BusinessDesk