February 22, 2010

Spanish dairy business up for grabs

Several European milk groups have joined the race to buying Spain's Ebro Puleva's EUR500 million (US$681.2 million) dairy business.

Ebro has reportedly received six offers for its dairy operations, including a proposal from French private equity firm PAI Partners.

Other bidders are believed to include France's Groupe Lactalis, Italy's Parmalat and Spain's Central Lechera Asturiana (Clas).

Success by PAI would represent the second French success this year in acquiring a Spanish dairy business.

Lactalis earlier this month announced the purchase of cheesemaker Forlasa for an undisclosed sum, a move believed to have prompted some disquiet in Madrid. London broker Icap said after the acquisition of Forlasa, the Spanish government appeared reluctant to allow a highly labour-intensive sector to be placed into foreign hands.

Icap added that Clas and Pascual, another of Spain's big dairy groups, would not be able afford the Ebro division.

The auction comes against a backdrop of a tough Spanish milk market, as consumer tighten purse strings in one of the EU countries worst affected by the economic downturn.

Weakness in the Spanish consumer sector is well documented and with private label milk selling 25% below branded milks, branded milk price could decline by another 5-10%, Icap said.