Parmalat requests $144m reduction in Lactalis American Group acquisition price

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Dairy giant parmalat, Shareholder

Parmalat requests $144m cut in LAG acquisition price
Italian dairy giant Parmalat has requested a $144m (€110m) reduction in the price it paid to acquire its sister unit, Lactalis American Group (LAG), from Lactalis in May 2012.

Parmalat’s Board of Directors approved the price adjustment request at a shareholders meeting, following a court-monitored audit of the disputed deal. The request has now been passed on to Lactalis - the majority shareholder of both Parmalat and LAG.

The company settled on the figure following an assessment of the initial $904m (€700m) transaction price by PricewaterhouseCoopers (PwC), and independent panel of experts, and the company’s Committee for Related-party Transactions.

A special commissioner was also appointed in April 2013 to oversee the price revision following a civil probe into the legality of the deal.

The investigation was sparked by concerns that the deal was pushed through by Lactalis and its parent company, B.S.A., to drain Parmalat’s then €1.5bn cash pile.

Price adjustment of $144m requested

Parmalat drafted in PwC in March 2013 to assess the acquisition price after LAG produced its financial results for 2012. LAG report EBITDA of just over $96m (€75m) for the period – a figure in excess of expectations.

At the time, Parmalat stated that the purchase price could be cut by up to $144m, or increase by as much as $56m (€43m) as a result of the audit.

Under the assessment, Parmalat’s Committee for Related-party Transaction made “necessary adjustments”​ to the EBITDA calculated by LAG based on a report submitted by PricewaterhouseCoopers (PwC) and the opinion of a panel of independent experts

“As a result of these restatements, the Committee computed a price adjustment of at least $140m,” ​said Parmalat in a statement.

“The Panel of Independent experts concluded that a price adjustment of about $134m in favour of Parmalat would constitute a ‘reliable and robust reference basis for Parmalat in the price adjustment procedure activated with regard to the seller.’”

“Consequently, the Board of Directors, taking into account the opinion and findings of the Committee, approved unanimously a resolution authorising the subsidiary LAG Holdings to send to the seller B.S.A. S.A – which owns an 82.2% interest in Parmalat S.p.A through Sofil S.A.S – a letter requesting a price adjustment of $144m, which corresponds to the maximum contractually provided price adjustment.”

2012 financial results adjusted

At the meeting, Parmalat’s Board of Directors also approved amendments to its 2012 full-year financial results on the back of a recent court decision.

Last month, an Italian court annulled Parmalat’s acquisition of Rome-based fresh milk firm, Centrale del Latte di Roma. Parmalat was ordered to return its controlling 75% stake in the company to the city of Rome.

On the back of the court’s decision, Parmalat’s Board of Directors agreed to update its financial statements for the year ended 31 December 2012 “to reflect a negative economic impact of €95.1m.”

“The statutory net profit thus decreases from €143.2m to €48.1m and the consolidated net profit contract from €175.2m to €80.1m,” ​said the company.

Related topics: Manufacturers, Lactalis

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