Parmalat secures price cut in US acquisition

Parmalat secures price cut in US acquisition

Italian dairy group Parmalat has secured a reduction in the price it will pay for Lactalis America Group, the US arm of its majority owner Lactalis.

The board of the Italian dairy processor indicated that it has secured a cut of US$130m to the $904m it paid for Lactalis American Group last year. The total enterprise value now stands at $774m, Parmalat's board said in a notice to the market.

Parmalat had originally requested a price reduction of $144m, after controversy over the acquisition erupted in Italy.

Lactalis owns 82.2% of Parmalat and the deal, struck last year, has proved controversial with the rest of the Italian firm's shareholders, who have argued it is not in the business's interest and suggested Parmalat overpaid for Lactalis American Group.

Commenting on the news, Kepler analyst Daniele Ridolfi said the news was a positive for the group as the settlement would bring the focus back to the "fundamentals of the company" which "remain solid".

For fiscal 2013, management has targeted year-on-year EBITDA growth of 5%. "The EBITDA growth will be chiefly driven by cost savings, higher sales prices and the containment of overhead, offset in part by the appreciation of the euro versus the currencies of major countries where Parmalat operates," Ridolfi suggested.