Canada’s Saputo spreads into UK market with £975m deal

Dairy Crest acquisition for growth in UK drives its share price up 15%

Montreal-based Saputo says  Dairy Crest is an attractive platform for growth in the UK. Photograph: Michael Nagle/Bloomberg

Montreal-based Saputo says Dairy Crest is an attractive platform for growth in the UK. Photograph: Michael Nagle/Bloomberg

 

Canada’s Saputo is to enter the British market for the first time after agreeing to buy food company Dairy Crest for £975 million.

Shares in Dairy Crest were up 15.3 per cent at a 20-month high of 640p inLondon, topping Saputo’s offer of 620p per share in cash.

The takeover comes after a five-day surge in the stock that lifted the price by 17 per cent on heavy volume.

Montreal-based Saputo described Dairy Crest as an attractive platform for growth in the UK, adding that Dairy Crest would continue to make its products from existing facilities in the country.

Dairy Crest’s Cathedral City and Davidstow cheese brands and Country Life butter will complement Saputo’s existing cheese business, which include Armstrong Cheese and Cheese Heads.

The deal comes about a month ahead of Britain’s plan to exit the European Union, which is expected to put pressure on supply chains and boost prices of dairy products.

Brexit blow

Dairy Crest said in January that it was speeding up buying ingredients and packaging material to cushion any Brexit blow, although the company’s supply chain and customer base is primarily located in Britain.

Discussions between the companies first began in January this year and have moved on “quite fast” since then, a source familiar with the matter said.

Dairy Crest, which traces its history back to the British government’s Milk Marketing Board, plans to recommend that shareholders vote in favour of the deal, considering the terms “fair and reasonable”.

Saputo’s offer price represents a premium of about 11.7 per cent to Dairy Crest’s close of 555p on Thursday.

The British maker of Frylight sprays had been shifting strategy to focus more on its profitable cheese business and spreads, selling its dairy operations in 2014 after it struggled with low milk prices in the country.

Saputo, one of Canada’s largest dairy companies, has been growing through acquisitions with 30 deals since it became publicly traded in 1997. – Reuters