Nestlé to sell remaining ice-cream assets but commits to Froneri venture

Nestlé is exiting the remaining ice-cream business that does not sit within its Froneri joint venture with private-equity firm PAI Partners.

As the Swiss food and drinks giant announced its annual results today (19 February), complete with a restructuring around four business units, Nestlé said it is in “advanced negotiations” with UK-based Froneri for the assets.

CEO Philipp Navratil, who joined Nestlé in September, clarified on a follow-up media call today that the ice-cream business up for disposal generates “just shy” of SFr1bn ($1.2bn) in sales and is centred on six markets.

Addressing analysts earlier this morning, Navratil said: “There are times when we decide that focusing means exiting businesses. This is the case with our remaining ice-cream business – it’s strong but small, and it’s a distraction for us.

“This business is a great fit for Froneri and we have agreed to sell the business in a phased way.”

The CEO clarified with reporters the sale is in progress and should be completed by early next year, insisting “there is no plan to exit the JV with Froneri”, Just Food reports.

Like FMCG peer Unilever, Nestlé will maintain a distant presence in ice cream but outside of its core corporate structure.

Unilever spun-off its ice-cream operations into The Magnum Ice Cream Company last year. While it still retains around a 20% interest in the independent business, Unilever also plans to exit in a phased manner.

Nestlé entered the 50-50 partnership with PAI Partners in 2016 when the food major merged its European ice-cream operations with UK-based R&R Ice Cream, which was owned by the private-equity firm.

Under the initial joint venture, Nestlé’s and R&R’s ice-cream operations in Europe, the Middle East, Argentina, Australia, Brazil, the Philippines and South Africa were combined. While the US and Israel were not included in 2016, three years later the latter was also pulled under the Froneri umbrella.

Nestlé then sold its US ice-cream operations the same year to Froneri.

Navratil said today: “We held on to those six businesses because we thought we could drive growth. Looking at it now, they don’t have any global scale and we cannot drive this the same way as Froneri can. They have scale, they have the knowledge and they have the brands.”

Just Food has asked Nestlé to confirm what the remaining ice-cream assets entail and to identify the six markets concerned.

Sources familiar with the sale proceedings, who asked not to be named, told Just Food that PAI Partners has been in discussions with Nestlé to acquire the ice-cream assets. “Good progress” has been made, they said.

PAI Partners declined to comment.

In October, the investor restructured its shareholding in Froneri with a minority investment from the Abu Dhabi Investment Authority (ADIA).

ADIA, which invests on behalf of the Abu Dhabi government, acquired a minority, undisclosed portion of PAI Partners’ 50% share via a wholly-owned subsidiary as a co-investor with the private-equity firm.

Meanwhile, Goldman Sachs, via Vintage Strategies at Goldman Sachs Alternatives, reinvested in Froneri through a so-called single-asset continuation vehicle (CV).

Navratil added today: “We’re really happy with the performance that Froneri is driving. Selling the remaining ice-cream businesses of Nestlé into Froneri is our strong belief that Froneri is the right owner for those businesses and will drive a better performance than we will do going forward.”