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Dairy Crest denies Lactalis takeover talks

By Chris Mercer , 20-Dec-2005

Dairy Crest, Britain's biggest dairy processor, has denied holding takeover talks with French dairy giant Lactalis, despite the emergence of Lactalis documents weighing up the pros and cons of a deal.

Dairy Crest said, amid feverish press speculation, that it "that it has not received a formal approach or indicative offer for the Company and that it is not engaged in such discussions with Lactalis or any other party".

Documents from Lactalis regarding its views on buying Dairy Crest were passed to the UK's Guardian newspaper, which published details on Monday. It said the UK company had made the first move this autumn.

Dairy Crest's shares soared to record highs at more than 520p as a result, though dropped 5p Tuesday morning.

The report said Lactalis had codenamed the operation 'Project Marguerite', and detailed that buying up Dairy Crest could give it 60 per cent of the UK cheese market; something that may alert competition authorities.

A Lactalis spokesperson refused on Tuesday to confirm or deny the company's interest in Dairy Crest. He said "there were contacts that's clear, but we have contacts with many dairy companies, like Arla Foods - and we are not going to buy them".

Lactalis recently bought Scottish cheesemaker McLelland, which owns the successful Seriously Strong cheddar brand. And the UK is already a big private label market for Lactalis.

Dairy Crest owns the UK's most popular cheddar brand, Cathedral City, and has made important moves into added value sectors this year with the launch of St Ivel Advance milk enriched with omega-3 fatty acids.

The group also plans to launch a St Ivel spread with omega-3, carrying heart health claims, early next year.

Lactalis, however, may be less keen on a deal after agreeing a joint-venture deal with Nestlé, the world's biggest food group, last Thursday.

The deal will create Europe's second-biggest chilled dairy business with projected sales of €1.5bn in its first year. Shares in the firm will be split 60-40 in favour of Lactalis.

Nestlé is keen to make use of Lactalis' supply network, logistics expertise and its greater presence in private label chilled dairy. Yet, Nestlé will give Lactalis access to important brands and open up research and development facilities to the venture.

Nestlé spokesperson François-Xavier Perroud said the group wanted the deal to improve a chilled dairy business "that has not been satisfactory for us for some time".