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Swiss company Nestlé will sell its US ice cream business to its joint venture with EU private-equity firm PAI Partners Froneri for $4 billion.
Nestlé and PAI Partners merged Nestlé’s EU ice cream business in 20 countries and Pai Partners-owned R&R Ice Cream to create Froneri in 2016 – which is now one of the world’s largest ice cream companies.
The deal is expected to be finalized in the first quarter of 2020, following regulatory approvals.
This divestment initiative is the latest by CEO Mark Schneider who took over Nestlé in 2016. The company has been focusing on selling premium products in high-growth categories such as baby food and coffee, while offloading underperforming businesses such as lunch meat and chocolate.
In February, Nestlé put its Herta lunch meat business up for sale and it is still seeking buyers. The lunch meat business achieved nearly $700 million in sales in 2018. In January 2018, Nestlé sold its US confectionery business with brands like Butterfinger, Crunch and Baby Ruth to Italian manufacturer Ferrero for $2.8 billion.
Schneider is said to be seeking to reorganize the company’s portfolio ahead of a possible initial public offering (IPO) in a few years.
Froneri’s expansion plans
Froneri currently manages Nestlé’s ice cream business in Europe, Latin America, Africa and Asia. The company recently acquired New Zealand ice cream company Tip Top and Nestlé’s ice cream business in Israel. “(We) are convinced that Froneri’s successful business model can be extended to the US market,” said Schneider.
With the sale of Nestlé’s US ice cream business, it is estimated that Froneri will generate sales of approximately $5.13 billion a year. This estimate is an increase from $3.01 billion from last year.
“We’re very excited about taking Froneri into the US, and we hope to grow the business there with Nestlé’s fantastic brands like Häagen-Dazs and Drumstick,” said Froneri’s CEO, Ibrahim Najafi. The brand rights in the US to Häagen-Dazs will be fully owned by Froneri. Froneri is also seeking to acquire the non-US rights to the brand, which are currently owned by General Mills.