Arla faces competition from minority Arab Dairy Co. shareholder Pioneers Holding Co., an Egyptian investment fund

Arla faces competition from minority Arab Dairy Co. shareholder Pioneers Holding Co., an Egyptian investment fund

Arla Foods has entered the race to buy Egyptian dairy firm Arab Dairy Products Co.

The dairy group has announced a non-binding bid offer for up to 100% of the shares in the company.

Arla's bid, priced at EGP65 a share, comes after Egyptian investment firm Pioneers Holding made an offer worth EGP56 a share. Pioneers already owns 25% of Arab Dairy.

Arla said the move was aimed at making it one of the "top five or six players" in the Egyptian dairy sector.

"Our bid is non-binding, but has now become official because Arab Dairy is listed on the Egyptian Exchange. The company seems well-aligned with our ambitions in Egypt, and we are now looking at the details before deciding whether or not to actually purchase a share of the business," said Rasmus Malmbak Kjeldsen, senior vice president for Arla's business in the Middle East and Africa.

Arla is set to conduct due diligence on Arab Dairy. A spokesperson said it was "too early" to say whether it would up its offer should Pioneers submit a second bid.

Arab Dairy Products Co. posted annual sales of DKK508m (US$88.2m) in 2013. It has interests in both the retail sector and foodservice. The acquisition would give Arla a 13-15% market share in the cheese category, it said.

Earlier this year in an interview on the sidelines of the Gulfood trade show in Dubai, Kjeldsen told just-food Arla was looking at building "stronger partnerships in west and north Africa, with a particular focus on Egypt and Libya. He added he expected trade to grow by 20-25% across Africa, inclusive of Egypt, in the next four years.

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Arla is making a non-binding bid for a majority stake in Arab Dairy Products Company (ADPC.ca), a listed company based near Cairo. If the company is found to be sound and healthy, Arla looks set to become one of the top five or six players in the Egyptian dairy sector.

A so-called due diligence phase is now commencing, where Arla, after having made a non-binding bid for up to 100 per cent of the shares, has access to detailed information about the more sensitive aspects of Arab Dairy’s business which are not published in its annual reports.

“Our bid is non-binding, but has now become official because Arab Dairy is listed on the Egyptian Exchange. The company seems well-aligned with our ambitions in Egypt, and we are now looking at the details before deciding whether or not to actually purchase a share of the business,” says Rasmus Malmbak Kjeldsen who is Senior Vice President for Arla’s business in Middle East & Africa.

Arab Dairy is interesting because it has a strong position in both the retail sector and food service, which ties in well with Arla’s focus on these particular sales channels. The acquisition can place Arla among the top five or six biggest players in the Egyptian dairy sector, and gives it a market share of 13-15 per cent in the cheese categories.

Arab Dairy – highlights:

Revenue: DKK 508m in 2013 Sales volume: 43,000 tonnes of dairy products in 2013 Number 1-4 in several of the main categories, primarily feta-like cheese, processed cheese and yellow cheese Main brand: Panda Eight distribution centres and 125 distribution vehicles operating nationwide Production capacity 80,000 tonnes at a modernised facility 50 km outside Cairo – with land for possible extension “Arab Dairy’s local production is based on recombining, where water is added to milk powder and then processed into cheese. Approx. 80 per cent of this milk powder is imported to Egypt. Consequently, there is considerable potential for using milk supplied by owners in value-added products which we can sell in a growing market,” says Rasmus Malmbak Kjeldsen.

Egypt – facts: A growth country Egypt is one of the biggest dairy markets in the Middle East and North Africa, a region that has a lot in common when it comes to dairy consumption. The Egyptian population counts almost 90 million people and, like their purchasing power, it continues to grow. In addition, many consumers are moving away from dairy products produced at home or locally to eating products manufactured and packed at commercial dairies and bought in shops.

Read more about Arab Dairy at www.arabdairy.com

Original source: Arla Foods