India-based Prabhat Dairy has signed a definitive agreement to divest its dairy business to Tirumala Milk Products, a subsidiary of French dairy major Lactalis, for Rs17bn ($238m).

Following completion, Prabhat Dairy plans to focus on its cattle feed business. Part of the divestment’s proceeds will be shared with Prabhat shareholders.

In a BSE filing, the company stated: “The transaction involves sale of the dairy business undertaking of Prabhat Dairy by way of slump sale on a going concern basis, along with the sale of 100% shareholding in Sunfresh Agro Industries Private Limited (a step-down subsidiary of Prabhat Dairy Limited) via a share purchase agreement.”

“The transaction involves sale of the dairy business undertaking of Prabhat Dairy by way of slump sale on a going concern basis.”

The deal is expected to be completed by Q1, 2019-20.

Prabhat Dairy joint managing director Vivek Nirmal said: “The association with Lactalis, one of the world’s largest dairy players, will offer this business a strong platform for accelerated growth momentum in becoming one of the largest private dairy businesses in India.”

Prabhat Dairy has a total milk processing capacity of 1.5 million litres per day and annual revenue of Rs15.5bn, reported The Economic Times.

The company analysed several strategic alternatives for its dairy business, but decided that the deal with Tirumala was the most suitable.

The deal is expected to allow Prabhat Dairy to achieve its long-term growth objectives and boost its balance sheet. Besides the cattle feed business, Prabhat Dairy plans to expand into related businesses such as animal nutrition and genetics.