Trade buyers should not be written off as potential buyers of dairy Crest’s French spreads division just because of rumoured private-equity interest, say industry sources.

Reports earlier this week suggested three venture-capital funds had shown interest in the St Hubert business, with Cinven, Montagu and PAI Partners all understood to be in the running.

One senior dairy industry source told The Grocer PAI Partners had shown particularly strong interest in St Hubert because of its previous positive experience of the dairy sector through its investment in Yoplait.

PAI sold its 51% stake in Yoplait to General Mills last year for a reported €825m - about 10 times more than its initial investment. Its ownership of Yoplait would also have given PAI previous exposure to Dairy Crest, which was a 49% shareholder in Yoplait UK until selling its stake in 2009.

However, one City analyst said it was hard to see a strong case for a private-equity buyout, because Dairy Crest had created a cost-efficient business and driven up St Hubert’s market share.

“It’s difficult to see how private equity could derive value, whereas the others would be buying into a new sector of the market and could get cross-selling opportunities,” the analyst said.

A second dairy source added St Hubert could be attractive to a wide range of trade buyers, including those outside the dairy industry. “My thinking is that as there isn’t a lot of dairy involved - it’s mainly vegetable oil - it won’t necessarily be a dairy business,” he said.

Kerry Foods and Lactalis are believed to have shown interest, with European dairy giants Arla, Müller and FrieslandCampina also expected to be watching.

Dairy Crest is set to receive a second round of bids on 25 June. Neither it nor any of the businesses thought to be interested would comment.

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