The Italy-based firm, which famously collapsed in 2004 under significant debts and accusations of fraud, is set to complete the takeover of LAG by the end of July 2012 having agreed to pay the enterprise value of $904m (€715m) for the firm.
Parmalat and LAG are essentially owned by the same company – Belgium-based BSA International. This has led to suggestions from the Italian media that the purchase was merely a way of moving money between the subsidiaries.
The firm has denied this, instead describing the acquisition as an “industrial strategic investment.”
For Parmalat, the takeover will offer them many opportunities; entry into the US dairy market, a stronger position in South America and an expanded cheese offering.
Parmalat spokesman Fabio Caporizzi told DairyReporter.com that the agreement signifies the “return to an important market.”
“The company lost a lot of opportunities after the 2004 crash,” said Caporizzi. “But through this acquisition we have strengthened our position in the strong US dairy market.”
“Through this investment, Parmalat will achieve more than it would do buying something in the European Union, because at the moment this market is giving very few good results.”
“If you are given the chance to invest in the US market, then you take it.”
“It means that Parmalat now has a wider offer for the North American market and improved competition conditions for the South American market,” said Caporizzi.
Parmalat currently operates in the Colombian and Venezuelan dairy markets. Through the acquisition it hopes to expand its presence to other high growth areas of Latin American such as Brazil, Argentina and Mexico.
“Through the acquisition of Lactalis American Group, Parmalat will strengthen its position in Latin America, taking advantage of LAG’s existing status as a company that exports to many South American countries.”
“Parmalat will strengthen its position in both in the US and the South American markets through this intragroup acquisition,” he added.
The acquisition will offer Parmalat a move into the ‘soft and fresh’ cheese market, which the firm is currently virtually absent from, as well as further opportunities to export cheese from Canada to the US.
Lactalis American Group, which recorded revenues of $973.3m in 2011, operates mainly in the US, producing and distributing cheese and other dairy products.
Its portfolio includes international brands such as Galbani and President and local brands such as Sorrento, Precious and Mozzarella Fresca.
“Lactalis American Group’s focus is on cheese, which gives us an increase in margin. Cheese brings more margins to Parmalat’s budget,” added Caporizzi.
Parmalat will also continue to work on developing its Italian brands, with plans to establish them in the US.