Swiss dairy and infant-formula maker Hochdorf has sold its stake in Pharmalys following a business review launched in May.

The loss-making company has disposed of its 51% holding in the baby-food subsidiary, acquired in 2016, to the other shareholder Pharmalys Invest Holding, controlled by Amir Mechria, for CHF100m (US$100.9m). The deal includes Pharmalys Laboratories SA, Pharmalys Africa Sarl and Pharmalys Tunisia SA.

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Hochdorf’s review already culminated in its exit from cereals and ingredients, while it also previously sold a 90% holding in Hochdorf South Africa to African Chocolate. Despite the sale of Pharmalys, Hochdorf said it will continue to focus on baby-care products, including infant-formula. Pharmalys will also continue marketing Swiss baby food pro­duced by Hochdorf, which itself will retain the Swiss brands Bimbosan and Babina.

“With this move, Hochdorf is taking an important step towards financial recovery and increasing its strategic flexibility,” it said in a statement. “The business model of Pharmalys gave the Hochdorf executive bodies little transparency in their operational implementation and little influence on relevant parts of the value chain. In addition, the financing of the net current assets of Pharmalys proved to be extremely capital-intensive.”

Hochdorf has sold the business for less than it paid. The statement noted how the company paid CHF245m for shares in the three units within Pharmalys Group up to March 2018 – CHF114m in cash and CHF131m via a mandatory convertible bond.

Pharmalys Invest Holding will pay “several” instalments for the 51% stake until September next year.

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Hochdorf added in its statement: “With the sale of the Pharmalys investment, the Hochdorf Group regains its strategic flexibility and takes an important step towards financial recovery.” However, it noted it still expects a “negative result” for the current financial year. The company had earlier reported a CHF63.6m first-half loss.

Commenting on the stake disposal in a research note, Gian Marco Werro, a consumer goods analyst at MainFirst, said: “The loss from this unsuccessful investment is clearly disappointing, but might have been partly anticipated. Despite this, the facts that a) investors and credit lenders get more clarity about Hochdorf’s new setup, and that b) the company can meaningfully deleverage (from net debt-to-EBITDA-20E 6.5 times to 4.4 times), are positive developments. 

“In our view, the continued partnership between the two is also a positive sign, as Hochdorf’s growth in Baby Care (36% of sales) strongly depends on its distribution in Northern Africa and the Middle East.”