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Parmalat exhibits Brazilian ambitions with BRF dairy plants deal

Today's announcement is the second of its kind made by Parmalat in Brazil in the last month.
Today's announcement is the second of its kind made by Parmalat in Brazil in the last month.

Brasil Foods (BRF), Brazil's third largest dairy, has agreed to sell 11 dairy processing plants in the country to Parmalat for for R$1.8bn (US$795m, €610m).

Parmalat, owned by French dairy giant Lactalis, announced earlier today it had signed a Memorandum of Understanding with Sao Paulo-based BRF for the purchase of 11 dairy manufacturing plants, corresponding assets, and trademarks.

BRF is Brazil's third largest dairy, behind Nestlé and Danone respectively. In 2013, it controlled a 10.3% share of the market. 

The BRF dairy plants set to be absorbed by Parmalat - Bom Conselho, Carambeí, Ravena, Concórdia, Teutônia, Itumbiara, Terenos, Ijuí , Tres de Maio I, Tres de Maio II, and Santa Rosa - generated R$2.6bn (US$1.2bn, €890m) of revenue in 2013.

Parmalat will finance the deal, if granted regulatory approval, entirely with "internal resources."

The Memorandum of Understanding with Parmalat was approved by the BRF board, which announced in February 2014 that it was “considering strategic alternatives for its dairy division including the formation of partnerships or the partial sales of such assets to third parties.”

DairyReporter.com reported in June 2014 that a total of 14 firms were battling to get their hands on BRF's dairy assets.

Brazilian ambitions

Parmalat has seemingly set its sights on conquering the Brazilian dairy sector, with today's announcement the second of its kind in less than a month.

The Italian dairy is currently awaiting regulatory approval to purchase the UHT milk and cheese operations of Brazilian dairy Lácteos do Brasil (LBR), which was granted bankruptcy protection in February 2013, for R$250m (US$110m, €83m).

Under the terms of the offer, announced last month, Parmalat stands to acquire manufacturing capabilities that in 2013 churned out R$580m (US$255m, €193m) worth of product.

It will also absorb offices, staff, and some LBR brands through the proposed deal, which was approved by a meeting of LBR creditors on August 21.

Final approval of the LBR deal lies with the Brazilian Bankruptcy Court and the country's antitrust authority, the Brazilian Administrative Council for Economic Defense (CADE).

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