Parmalat reveals LAG ‘profitability’ in attempt to dispel embezzlement concerns


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Parmalat's headquarters was searched by Italian police in December 2012 as part of criminal investigation into the LAG deal.
Parmalat's headquarters was searched by Italian police in December 2012 as part of criminal investigation into the LAG deal.
Parmalat has moved to dispel concerns about the legality of its intra-group acquisition of Lactalis American Group (LAG) by revealing better than expected financial results that “confirm the profitability” of the business.

In a statement issued yesterday, Parmalat revealed that LAG recorded pro-forma EBITDA and assets acquired of just over $96m (€73.75m, £63.8m) – a figure in excess of its expectations. The “formal communication”​ was received from LAG in connection with the determination of the final $904m acquisition price, Parmalat said.

The Parma-based company claimed that it decided to disclose the private information in an attempt to “clarify some untrue and exploitable news.”

Parmalat’s acquisition of LAG is currently the subject of civil and criminal probes by Italian authorities. The investigations were sparked by concerns that the deal was designed to drain cash from Parmalat by its owner, BSA International – which also owns LAG.

Clarify “untrue and exploitable” reports

Parmalat made the announcement following a meeting of its Internal Control, Risk Management and Corporate Governance Committee. The committee decided to disclose the information “with the aim to clarify some untrue and exploitable news and information recently disseminated on this issue.”

“The amount exceeds the previous one equal to $95.2m which has been estimated in the 2012 budget of LAG. This confirms the positive performance of LAG and the profitability of the investment made by Parmalat,” ​the statement added.

Speaking with, Parmalat spokesman Fabio Caporizzi said that the company hopes that the announcement will “underline”​ that the deal was in its best interests.

“The performance of this company is good. EBITDA was above forecast.”

“Parmalat issued the release to underline that this was a good deal, despite sceptical attitudes towards this acquisition,” ​said Caporizzi. “The reason for this announcement was to underline – to analysts, to journalists, and to the dairy industry – that this was a good deal and in the interests of the whole group.”

Caporizzi added, however, that Parmalat will ask for a revision of the $904m LAG acquisition price.

“Under the LAG deal, Parmalat has the right to review the price,” ​he said. “We have not arranged a final figure yet. It will be ready in a few weeks."

“Aggravated embezzlement” probe

Parmalat completed its acquisition of LAG in May 2012 – a deal it heralded as an opportunity to “strengthen its position in both the US and the South American markets.”

A civil investigation into the acquisition was launched in October 2012 after concerns were raised about the use of Parmalat’s then €1.5bn cash pile to finance the deal.

In December 2012, Italian police carried out searches at the Italian headquarters of Parmalat as part of a criminal investigation into the deal. Notices were also served to a number of Parmalat executives informing them that they were the target of an investigation into “aggravated embezzlement.”

The civil hearing, which is being chaired by three judges, heard closing arguments in February 2013.

The latest twist in the tale came last week when Parma's public prosecutor issued a new request to the court – calling for the appointment of an administrator to replace Parmalat’s current board to “implement necessary actions”​ to declare the LAG deal “nul and void.”

A decision is expected from the court within the next month. 

Related topics Manufacturers Lactalis

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