22nd Feb 2019 10:58
LONDON (Alliance News) - Dairy Crest Group PLC on Friday said it is recommending an approximately GBP975 million offer from Canadian firm Saputo Inc.
Saputo will pay 620 pence per share in cash for Dairy Crest in a deal that values the company at GBP975 million. This is a premium of around 12% to the FTSE 250-listed company's 555p closing price on Thursday and a 21% premium to its 30-day volume weighted average share price of 488p.
Shares in Dairy Crest, whose brands include Cathedral City cheese and Clover dairy spread, were up 13% at 625.00 pence per share on Friday.
Dairy Crest's directors will accept the offer and have "unanimously" recommended Dairy Crest shareholders do the same.
The purchase will be funded by Saputo from debt, which will be provided under a credit agreement underwritten by the National Bank of Canada and Bank of Montreal. Dairy Crest's existing debt, which stood at GBP265.7 million on March 31, will be refinanced using this credit agreement.
Saputo was founded in 1954 by the Saputo family, who just had emigrated Montreal from Sicily. Saputo listed in Canada in 1997 and has completed 30 acquisitions since then. It has around 15,000 employees and sells its dairy products in over 40 countries.
Saputo is a top-ten dairy processor worldwide and "the largest cheese manufacturer and the leading fluid milk and cream processor in Canada". It is also in the top three US cheese producers.
Saputo's products are sold under a number of brand names, including Devondale and Frigo Cheese Heads. Saputo "does not have a presence in the UK", it said, prior to the Dairy Crest acquisition.
Given that Saputo lacks a UK presence, Dairy Crest will continue to be managed and run by its current senior management and employees.
In the year to March 31, Saputo's revenue was CAD11.54 billion or GBP6.71 billion. For the nine months to December 31 revenue totalled CAD10.27 billion and net earnings were CAD631 million.
In the year to March, Dairy Crest's revenue was approximately GBP457 million with a pretax profit of GBP179 million including exceptional items. For the six months to to September 30, Dairy Crest's revenue was approximately GBP225 million with a pretax profit of GBP18 million including exceptional items.
"The board is unanimously recommending this all-cash offer by Saputo to buy Dairy Crest at an attractive premium, which represents compelling value for Dairy Crest Shareholders," said Dairy Crest Chair Stephen Alexander.
"Dairy Crest is a leading UK dairy company and the proud manufacturer of Cathedral City, the largest UK cheese brand. Saputo is one of the top ten dairy processors in the world. Both companies have built strong positions in the cheese sectors in their respective home markets."
"The price premium Saputo is offering reflects Dairy Crest's portfolio of market-leading brands, its manufacturing and innovation capabilities as well as its experienced management team, who will continue to run the business under Saputo's ownership. It is for these reasons the board is unanimously recommending this transaction to Dairy Crest shareholders," Alexander added.
Saputo expects the deal to complete in the second quarter of 2019. Once the scheme is effective, Dairy Crest's shares will be cancelled and it will be re-registered as a private company.
Chair & Chief Executive Lino Saputo said: "Dairy Crest is an attractive platform for Saputo and fits well within our growth strategy. We believe 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.
"This recommended offer represents a compelling opportunity for Dairy Crest shareholders, providing immediate value certainty."
Related Shares:
Dairy Crest