A major British dairy company is poised to become the property of one of Canada’s biggest dairy processors in a $1.7 billion all-cash deal.
Saputo Inc. announced Friday it has an agreement in place with Dairy Crest Group — the maker of Cathedral City cheese and Country Life butter among other major U.K. dairy brands — to buy up all its shares for £6.20 (C$10.63) each.
For Saputo, which markets its products in about 40 countries, the acquisition would be its first in the U.K. — and in Europe, for that matter — offering the Canadian company a platform for growth into those markets.
Dairy Crest’s board plans to unanimously recommend to shareholders that they vote in favour of the deal, Saputo said, noting it already has “irrevocable undertakings” from Dairy Crest’s shareholding board members for their votes.
Subject to shareholder and court approval and the usual closing conditions, Saputo said it expects to close the deal in the second calendar quarter of this year.
Based at Esher, southwest of London, Dairy Crest dates back to 1933 and the depression-era formation of Britain’s Milk Marketing Board, which spun off its milk processing business into a separate division under the Dairy Crest name in 1980.
The Dairy Crest division became a separate publicly traded company in 1996 and sold off its dairies business in 2015 to focus on making branded foods and value-added ingredients.
For its part, Saputo said this deal will allow it to “expand its international presence and enter the U.K. market by acquiring and investing in a well-established and successful industry player with a solid asset base and an experienced management team.”
“Dairy Crest is an attractive platform for Saputo and fits well within our growth strategy,” CEO Lino Saputo Jr. said in a Dairy Crest release.
“We believe that under Saputo ownership, Dairy Crest will be able to accelerate its long-term growth and business development potential and provide benefits to Dairy Crest’s employees and stakeholders.”
Dairy Crest chairman Stephen Alexander, in the same release, said the deal “should enable Dairy Crest to benefit from Saputo’s global expertise and strong financial position to fulfil and accelerate its growth ambitions.”
In its recent third-quarter update, Dairy Crest noted “significant uncertainty” around Britain’s impending “Brexit” from the European Union, adding that “the impact of a potentially disorderly exit is hard to predict.”
The British company noted its supply chain and customer base are primarily in the U.K., but added “we are taking steps to reduce our exposure, including accelerating the purchase of ingredients and packaging materials.”
Montreal-based, publicly-traded Saputo ranks among the world’s top 10 dairy processors and is the world’s largest cheesemaker. It’s also the top fluid milk and cream processor in Canada, Australia’s biggest dairy processor and Argentina’s second largest, and one of the top three cheese producers in the U.S.
Saputo, whose brands include Dairyland, Armstrong, Milk2Go/Lait’s Go and Neilson, among others, has been expanding largely through acquisitions in recent years.
Its most recently completed deals include U.S. cheesemaker F+A Dairy Products in November, Ontario cheese and yogurt maker Shepherd Gourmet in June and Australian dairy co-operative Murray Goulburn in April.