Dairy

Parmalat and Kraft Enter into €1.1 Billion Agreement

Kraft Heinz Canada to sell its Canadian ‘natural’ and ‘high added value’ cheese business to Parmalat

Through a series of agreements, Parmalat acquired the natural cheese division of Kraft Heinz Canada which markets, among others, the brands Cracker Barrel, P’tit Quebec and aMOOza. The deal’s price – which will be subject to the approval of Canada’s authorities – is about €1.1 billion. The acquired business includes a production facility in Inglesid, Ontario, with about 400 employees, and significant volumes of milk quotas. “With this deal, Parmalat Group acquired a significant portfolio in the ‘natural’ and ‘high added value’ cheese segments, in an important market such as Canada” explains the Italian dairy company in a statement. Natural cheeses can include unripened cheeses such as cottage cheese, soft cheese such as Camembert or hard cheeses such as Cheddar.

THE DEAL BETWEEN PARMALAT AND KRAFT

The deal comes a month after the new United States-Mexico-Canada Agreement (USMCA) was signed, under which Canada partially opened its protected domestic market to the United States. The cheese business being sold by Kraft generated about C$560 million in net sales in 2017, Kraft and Parmalat said in statements. The transaction followed a competitive bidding process, Parmalat said. The U.S. food group will continue to own and market other cheese products, including Philadelphia, Cheez Whiz and Kraft Singles, which are processed in Quebec. RBC Capital Markets served as exclusive financial adviser to Kraft Heinz Canada, while Fasken Martineau DuMoulin LLP served as legal advisers.

Lactalis logo-Parmalat

THE PROS FOR THE TWO COMPANIES

According to Reuters, Kraft, which like other consumer goods firms has been struggling with rising costs for raw materials and transportation, expects to use proceeds from the deal to pay down debt, which amounted to nearly $31 billion as of Sept. 29. Parmalat said the activity will reinforce its century-old Canadian business that already comprises 3,000 employees and 16 dairy processing plants, helping to secure jobs and farm revenue. Parmalat’s acquisition in Canada marks a further addition to the North American footprint of France’s Lactalis, the world’s largest dairy firm that controls nearly 90% of Parmalat.

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