December 3, 2023

DealBook: Lactalis Bids $4.95 Billion for Rest of Parmalat

Lactalis of France, one of the world’s biggest cheesemakers, said on Tuesday that it was bidding 3.4 billion euros, or $4.95 billion, for the rest of Parmalat of Italy that it does not already own — a deal that would create the largest dairy company in the world.

The Lactalis bid comes on the same day President Nicolas Sarkozy of France is arriving in Rome to discuss, among other things, the sensitive issue of French companies acquiring a number of their Italian peers.

“We have an ambitious growth plan for Parlamat, creating a benchmark Italian dairy group on a global level, which would keep its headquarters, organization and management in Italy,” said Emmanuel Besnier, head of the Lactalis Group.

Lactalis is offering 2.60 euros for each Parmalat share for the 71 percent of the company it does not already own. That is 12.45 percent above Parmalat’s closing price on Monday and 21.3 percent above its average share price in the last year.

The French company, which became Parmalat’s largest shareholder last month, has moved quickly to make a bid for the full company in the face of political opposition, citing a “change in the regulatory framework” tied to its investment.

Earlier this month, an Italian court decided to allow Parmalat to postpone its annual shareholder meeting until the end of June. The move would give the Italian government time to create new rules that could protect Italian companies from foreign takeovers.

“Milk is not a strategic product,” said Michel Nalet, a spokesman for Lactalis, citing the General Mills deal last month to buy half of the French yogurt maker Yoplait for $1.1 billion. Lactalis had originally bid for Yoplait, but was rebuffed.

Such cross-border deals have ruffled political feathers. When Pepsi was reported to be weighing a bid for the French yogurt maker Danone in 2005, the French prime minister at the time, Dominique de Villepin, said he would “defend the interests of France.” In the end, no bid was made.

In 2006, Lactalis bought another Italian dairy producer, the cheesemaker Galbani, from the private equity firm BC Partners, in a deal thought to be worth more than 1 billion euros.

“Galbani stayed Italian, and it’s now the second most important cheese in the group,” Mr. Nalet said. “We have the same strategy for Parmalat.”

Lactalis went further to reassure Italian authorities, saying that after the takeover it intended to relist Parmalat on the bourse in Milan, maintaining the necessary minimal free float.

In Rome, Prime Minister Silvio Berlusconi told reporters, “I do not consider the takeover bid a hostile takeover bid,” according to Reuters.

Parmalat shares rose 27 euro cents, or 11.7 percent, to 2.58 euros on the exchange in midmorning trading on Tuesday.

Parmalat gained notoriety in December 2003, when it disclosed that a bank account that supposedly held some $5 billion did not exist. The company soon toppled into bankruptcy. In December, Parmalat’s founder and former chief executive, Calisto Tanzi, was sentenced to 18 years in prison for his role in the collapse.

When it collapsed, Parmalat had 36,000 employees and was one of the top 10 companies in Italy — it also had 14 billion euros worth of debt. It emerged from bankruptcy in October 2005, the same month it went public, and now has about 14,000 employees.

The company reported 4.3 billion euros in revenue last year.

This month, four major investment banks were cleared by an Italian judge of charges that they had abetted Parmalat in concealing its debt and overstating its profit. Bank of America, Citigroup, Morgan Stanley, Deutsche Bank and their employees were cleared, though the case may be appealed.

On Tuesday, Lactalis said Crédit Agricole, HSBC, Natixis and Société Générale had agreed to finance the deal.

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