Saputo to make its British entrance with acquisition of Dairy Crest

Dairy Crest plans to advise its shareholders to vote in favor of the deal as it considers the terms of the deal to be fair and reasonable.

Saputo Inc., a Montreal-based Canadian dairy company, has entered the British market with an agreement to buy Dairy Crest Group Plc., a leading British dairy products company. The deal has reportedly been finalized at £975 million ($1.27 billion).

For Saputo, Dairy Crest is an attractive growth platform for the company in the UK as Dairy Crest is expected to make its products from existing facilities in the country. Dairy Crest’s Country Life butter as well as Davidstow and Cathedral City cheese brands would complement Saputo’s cheese business which comprises Cheese Heads and Armstrong Cheese.

Remarkably, the deal comes at a time when Britain is only one month away from its exit from the European Union which is anticipated to create problems for the supply chains and raise prices of dairy products. In January, Dairy Crest has announced that it will be buying ingredients and packaging material to create a buffer to offset the effects of Brexit in spite of the company’s supply chain and customer base being primarily based in Britain.

Sources close to the matter suggest that the companies began their discussion in January 2019 and have moved rapidly. Dairy Crest plans to advise its shareholders to vote in favor of the deal as it considers the terms of the deal to be fair and reasonable.

According to sources, Dairy Crest has been shifting its focus and strategy to make its cheese and spreads business more profitable and therefore has been selling its dairy operations in 2014 when it suffered from the low milk prices in Britain. Saputo is reportedly one of the largest dairy companies in Canada and has been growing steadily through around 30 acquisition deals ever since it became a publicly traded company in 1997.

Saputo said that the deal will be funded by National Bank of Canada and Bank of Montréal who will provide debt under a fully underwritten credit agreement.