Corporate

Want an ice cream? You can buy the company

Iconic New Zealand ice cream brand Tip Top is definitely up for sale, according to the Australian Financial Review. The paper says it has seen proof that Fonterra has Tip Top on the market, confirming rumours that have been around for some months.

The AFR says it has seen a copy of a confidential information memorandum which shows indicative bids to buy Tip Top from Fonterra are due in by Monday.

The paper's Street Talk column says the business is being pitched by First NZ Capital as a “unique opportunity to invest in an iconic New Zealand company with 80 years of heritage.”

While the memorandum talks about Tip Top’s “unrivalled market position,” it also notes that Unilever, which has the rights to Magnum ice-cream and a host of dairy free products, dominates the premium end of the market where the big margins are.

It says Tip Top’s sales this year will be about $150 million. Earnings before interest, tax, depreciation and amortisation will be $20-25 million this year, rising to $30 million next year.

Its list of potential bidders include BGH Capital, Quadrant Private Equity, Pacific Equity Partners and UK trade buyer R&R Ice Cream. The latter bought Australia’s Peters Ice-Cream brand from PEP in 2014.

“Adamantem Capital, which was set up by a pair of former PEP dealmakers, is in and around the auction, as is Navis Capital, which is no doubt wondering how it can use its connections in Asia to grow Tip Top’s footprint,” the AFR says.

The Australian newspaper has also named Australian packaging billionaire Raphael Geminder and Kiwi billionaire Graeme Hart as potential Tip Top buyers.

Fonterra posted its first ever full-year loss last September, after writing down the value of its disastrous Chinese Beingmate investment and settling with French food company Danone over the August 2013 contamination scare. It has since said it will sell assets no longer deemed core, although hadn't confirmed that included the Tip Top business.

The AFR suggests buyers may be worried about what local farmers and other Kiwis will think if Tip Top is sold to a foreign owner.

Fonterra has told investors to expect an update on the sale on March 20 when it is due to post its first-half results.

Fonterra shares, which can be owned only by farmers, are trading at $4.50, up 9 cents from yesterday, while units in the Fonterra Shareholders’ Fund, which anyone can own, are at $4.52, up 11 cents. They have fallen about 25 percent in the last 12 months.

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