New Zealand dairy giant Fonterra has signed a deal to sell its Western Australia-based Brownes dairy business to DairyWest.

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DairyWest, owned by private-equity firm Archer Capital, will acquire the Brownes business, including the namesake brand and the Balcatta and Brunswick manufacturing sites, as part of the deal, Fonterra said today (21 October).

DairyWest manufactures and sells milk, yoghurt, dairy desserts and bulk cheese under the Brownes and Chill brands.

The agreement, which is only conditional on the transfer of certain key contracts and the finalisation of transitional arrangements, is expected to become effective early next year.

John Doumani, MD of Fonterra Brands Australia New Zealand, said the decision to sell the business reflects Fonterra’s overall strategic direction in Australia.

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“Our West Australian Brownes dairy business is a profitable business, with strong brands, consumer loyalty and a track record for innovation,” he said. “However, fundamentally Brownes is a regional business and it is not receiving the right level of focus within Fonterra given our decision to focus on national leadership in our priority categories of cheese, spreads, yoghurts and dairy desserts in Australia. Subsequently, the Brownes business will be better served as a stand-alone entity.”

Doumani said Fonterra remains “fully committed” to Western Australia through its mainland, Bega, Perfect Italiano, Western Star, Nestlé Ski and Nestlé Diet brands.

All Brownes employees and existing farmer arrangements in the state, including farmgate pricing, will transfer to DairyWest.