FrieslandCampina enters Pakistan dairy market through Engro Foods acquisition

By Jim Cornall

- Last updated on GMT

FrieslandCampina is acquiring 51% of the shares of Engro Foods, Pakistan's second largest dairy company.
FrieslandCampina is acquiring 51% of the shares of Engro Foods, Pakistan's second largest dairy company.

Related tags Stock market Milk

Royal FrieslandCampina N.V. has signed a share purchase agreement with Engro Corporation in Pakistan to acquire 51% of the shares in its subsidiary Engro Foods Limited, in partnership with the World Bank Group’s International Finance Corporation (IFC) and the Dutch development bank FMO.

Engro Foods is the second largest dairy company in Pakistan, which is the third largest milk-producing country in the world, with an annual production of 38 billion liters of milk.

FrieslandCampina expects to benefit from the conversion of the market from loose to packaged dairy consumption that will drive the volume growth of packaged dairy products.

At present, less than 10% of tradable milk consumed in Pakistan is processed and offered in packages. The conversion is expected to accelerate in the near future as a result of the growing middle income class, a desire for higher quality milk, as well as increasing urbanization.

Wider variety of products

Roelof Joosten, CEO FrieslandCampina, said the deal with Engro Foods will accelerate FrieslandCampina’s route2020 strategy.

“Engro Foods offers us a basis on which we can build further. This acquisition will contribute to the value creation for our member farmers. We will also contribute to Pakistan’s agricultural sector through knowledge transfer of dairy production and our established dairy development program,”​ Joosten said.

Hussain Dawood, Chairman of Engro Corporation said the partnership enables Engro to provide a wider array of affordable dairy products in Pakistan.

“Improving the wellbeing of millions of our farmers is a cause that our Group has been focused on for the past five decades. Working with FrieslandCampina, a company owned by farmers, will help us to accelerate our work on improving productivity in the dairy sector. I am convinced that this partnership will create tremendous long term value,”​ Dawood said.

Engro Foods

Engro Foods was established in 2006 and has since built a leading position in the Pakistani overall UHT milk segment, including the Specialized Tea Creaming segment.

Engro Corporation owns approximately 87% of the total share capital in Engro Foods while the remaining 13% is listed on the Pakistani Stock Exchange (PSX).

Engro Foods employs about 1,600 people and had annual revenues of about €450m ($501m) in 2015. It has a network of 1,635 milk collection centers, which collect milk from about 150,000 farmers on a daily basis.

Acquisition details

The transaction means FrieslandCampina will acquire a 51% stake in Engro Foods, to be acquired by a Dutch legal entity controlled by FrieslandCampina.

At closing of the transaction, FrieslandCampina will hold approximately 80% of this Dutch legal entity, and IFC and FMO will hold the remaining shares. The estimated total cost for the 51% stake in Engro Foods is €420m ($468m), depending on final settlement.

Engro Corporation, the current majority shareholder in Engro Foods, will continue to remain a shareholder and significant partner in Engro Foods.

FrieslandCampina, through the Dutch legal entity, will make a tender offer to the remaining shareholders of Engro Foods as per regulatory requirements, for at least 50% of the remaining shares of Engro Foods from public shareholders on the Pakistani stock exchange.

The actual number of shares purchased in the tender offer will be deducted from the number of shares acquired from Engro Corporation.

The acquisition is subject to regulatory approval from competition and other relevant authorities.

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1 comment

progress i pakistan

Posted by nooruddin akbar,

wonderful start at least some one trust pakistan and pakistani people. pakistan needs all the developing frontiers . tey are hard working people best labour only worst politicians in the world. only politicians who do nto love t heir country in the world

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