Yahoo Finance Canadian firm buying Cathedral City cheese owner Dairy Crest for nearly £1bn
Two dairy giants are joining forces.
Canadian dairy firm Saputo (SAP.TO) announced on Friday it is buying Britain’s Dairy Crest Group for £975m ($1.3bn USD).
Surrey-headquartered Dairy Crest (DCG.L) manufactures popular British products including Cathedral City cheese, Clover spread, Country Life butter and Frylight cooking spray. The Cathedral City cheddar brand is the largest in the country, with 20% market share.
Saputo, which is listed on the Toronto Stock Exchange, already has a global footprint, with large-scale operations in Canada, the USA, Australia and Argentina and annual sales in excess of $11.5bn CAD (£6.7bn). It is considered one of the largest dairy processors in the world and sells its products in 40 countries. But it doesn’t have any operations in Europe.
“The transaction would enable Saputo to expand its international presence and enter the UK market by acquiring and investing in a well-established and successful industry player,” Saputo said in a written statement.
It also said it is focusing on growth, not cutbacks.
“Dairy Crest would continue to manufacture its products from its existing facilities in the UK,” Saputo said in the takeover documentation. “Saputo would seek to support Dairy Crest’s innovation and new product development.”
The purchase comes in the face of Brexit risks, which have proven a big threat to other industries, including British manufacturing. But Brexit didn’t factor into any of the company’s statements.
“What they’re really buying it for currently is just the UK [market],” said Liberum’s consumer research analyst Robert Waldschmidt. “In that regard, [the risk of] a no-deal Brexit doesn’t matter that much because they produce for self-consumption. It’s not like they produce here to export out.”
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The Canadian firm offered £6.20 in cash for each Dairy Crest share. Investors were thrilled about the announcement and bid Dairy Crest shares up above the £6.20 level, indicating they believe another bidder may come along with a higher price or Saputo may have to raise its initial offer.
The stock was up by about 13% on Friday morning to trade around £6.27. It was the best-performing stock on the FTSE 350 index (^FTLC).
Dairy Crest’s board unanimously supported the purchase, with Dairy Crest chairman Stephen Alexander saying the acquisition should help the company “fulfil and accelerate its growth ambitions.”
“The board is confident that Saputo’s plans to invest in and grow the Dairy Crest business mean the proposed transaction is positive for all its stakeholders,” he said.
Dairy Crest employs about 1,100 people in seven locations across the United Kingdom. It had £467m ($610m USD) in sales last year.
The deal is expected to close by the middle of 2019.
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