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Italian government gives Ferrero a chance in fight over Parmalat

By Guy Montague-Jones , 25-Mar-2011
Last updated on 25-Mar-2011 at 17:44 GMT

The chances of Ferrero making a move on Parmalat to create an Italian food super-group have increased after the Italian government pushed through a decree to frustrate Lactalis’ bid to gain management control of Parmalat.

The confectioner Ferrero and other Italian companies, including the dairy firm Granarolo, have expressed openness to an “Italian solution” to the question of future control of Parmalat – the 12th biggest global dairy company.

The Italian government is keen to encourage a domestic bid to keep Parmalat in Italian hands after French group Lactalis built up a 29 per cent stake in the company over the past week.

The shareholding is just below the threshold for a mandatory takeover bid but possibly high enough for the company to impose its choice of board members at the next shareholder meeting.

With the next AGM planned for April, the Italian cabinet acted quickly on news of the Lactalis share build-up and approved a decree allowing Parmalat to postpone the meeting – possibly by 180 days.

MF Global analyst Andy Smith said this could make an Italian bid for Parmalat more likely.

“Any ability for Parmalat to postpone its AGM from 12-14 April to 30 June affords an opportunity to implement a defence against Lactalis – pending mobilisation of a national alliance.”

Speaking to DairyReporter.com, Smith evaluated how the Lactalis approach or an Italian bid from Ferrero and others would affect Parmalat.

Significant synergy potential

The analyst said Lactalis is probably interested in a tie-up between Parmalat Italia and Lactalis Italia – businesses with combined revenues of €2.5bn. Such a deal would deliver considerable synergies and bring in management with strong knowledge and understanding of the dairy sector.

On the other hand, a complete takeover from Ferrero and others is likely to deliver fewer but still significant synergies. Smith said: “There are more opportunities than you may have thought in raw milk supply, manufacturing, distribution, purchasing media and packaging.”

In addition, he said: “Ferrero has great branding expertise – it is a very good innovator and marketer.”

The consumer equity analyst was critical of the operational record of Parmalat and said both Ferrero and Lactalis have a lot to offer the company. One indicator of this is that Parmalat has almost four times the number of factories as Ferrero, producing a third less sales.

Smith said: "Parmalat has twice as many factories as it needs".

A huge fraudulent debt cover-up sent Parmalat into bankruptcy in 2003 and since then the company has been run by Enrico Bondi.

The turnaround specialist has built up a cash chest of €1.4bn, largely by suing investment banks linked to the fraud case, but has been criticised by shareholders for not reinvesting the money in the business. His name was absent from the list of proposed board members put forward by Lactalis at the end of last week.

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