Arla Foods has agreed to sell its profitable London Foodservice business to Dairy Crest for £4m in cash.

The company had assets worth £3.2m, including the freehold to its Nine Elms site in southwest London, and turned in a £2m operating profit in the 18 months to September 2004.

Arla insisted it was selling the business as a going concern and said it would use the money to reduce net borrowings.

From its three London sites in Nine Elms, Bloomsbury and Ruislip, London Foodservice supplied a range of branded catering supplies.

As well as Arla’s own milk and cheese, it also supplied products from Muller Light yoghurt to water, and from eggs to Tropicana fruit juice.

The sell-off follows the recent closure of the Ruislip dairy, which was part of a strategic review after Arla bought Express Dairies.

Dairy Crest said it would book one-off acquisition and integration costs of £3m this year.