Dairy Crest will remain a “passionately British food company”, CEO Mark Allen has insisted, despite its acquisition by Canadian dairy giant Saputo today in a near-£1bn deal.
The London-listed Cathedral City and Clover owner announced the £975m cash deal this morning. It is expected to be completed by mid-April, and is priced at 620p per share, representing an 11.7% premium on Dairy Crest’s closing price of 555p on Thursday.
Montreal-based Saputo is among the 10 largest dairy companies in the world, turning over more than C$11bn for the 12 months to 31 March 2018.
Chairman and CEO Lino Saputo said the deal would allow Dairy Crest to “accelerate its long-term growth and business development potential”, while also “providing benefits to Dairy Crest’s employees and stakeholders”.
And despite its new overseas ownership, Allen stressed the business was “still British”. The deal would give Dairy Crest the “ability to inject further pace” and attack new export markets for its brands and dairy ingredients business, he added.
“We’ve got British farmers and British milk in the west country which we are fiercely proud of. And we will still make British brands,” he told The Grocer. “That is absolutely not going to change.”
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Saputo brought with it “a strong balance sheet”, while the deal’s cash execution was “very simple”, with no competition concerns as the business previously had no presence in the UK. “It can also be delivered relatively quickly without us being in limbo for any length of time,” Allen added, in contrast to the protracted sale of its liquid milk division to Müller in 2015.
With predominantly European exports making up just 2% of Dairy Crest’s turnover, the acquisition also gave it the opportunity to significantly increase its presence overseas, Allen pointed out.
“It can give us access to markets around the world and a ready-made sales force as we look to export,” he said.
Saputo is the largest cheese manufacturer and the leading liquid milk and cream processor in Canada, the top dairy processor in Australia and the second-largest in Argentina. In the US, it ranks among the top three largest producers of extended shelf-life and cultured dairy products. “There is big scope for growth for us in these markets,” Allen added.
Saputo said it foresaw “only limited rationalisation of employee roles following the acquisition, mainly targeted at corporate and support functions, notably those related to Dairy Crest’s status as a public listed company”.
Given the ongoing Brexit uncertainty surrounding the UK economy, Allen also stressed the deal was not dependent on any specific outcome. It would be “business as usual” at Dairy Crest’s Surrey headquarters, its five manufacturing sites and its innovation centre on the Harper Adams University campus, he said.
The deal led Dairy Crest’s shares to surge by 13.2% in early trading to 628.3p. It has been largely welcomed in the City, and was described as a “pleasant surprise to investors” by AJ Bell investment director Russ Mould. “The cash offer gives them a chance to get out of a fairly pedestrian business and at a price that hasn’t been seen since September 2017.”
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