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By Tatiana Bautzer
SAO PAULO (Reuters) - Groupe Lactalis SA has moved forward with arbitration against BRF SA, claiming it refuses to recognize tax and labor liabilities at several plants it sold to the French dairy maker three years ago, a source familiar with the matter said.
Lactalis, through subsidiary Parmalat SpA, acquired 11 dairy factories from BRF for 1.8 billion reais ($576 million) in 2014. At the time, the companies agreed to set up an escrow account to cover potential pre-deal labor and tax contingent liabilities incurred by the factories.
According to the source, Lactalis and Parmalat deposited around 370 million reais in the escrow account. They said the liabilities are related to issues before the acquisition of the plants, a version BRF disputes, said the source, who asked for anonymity since the matter remains confidential.
BRF has blocked attempts by Lactalis and Parmalat to tap the escrow account in the form of compensation for the cost of such liabilities, the source added. As a result, the French company tapped the Brazil-Canada Chamber of Commerce, the venue established for conflict resolution in the acquisition contract, to resolve the dispute through arbitration, one of the people said.
The case is an example of significant risks for foreign investors in South America's largest economy. Brazil had three million labor-related lawsuits last year and has a notoriously complex tax system.
Amid the dispute, Lactalis placed a lower bid for Vigor Alimentos SA, a Brazilian peer that had been put on sale, the source said. The owners of Vigor sold control of it to Mexico's Grupo Lala SAB de CV last week.
Lala's bid valued Vigor at the equivalent of $1.8 billion, compared with Lactalis's $1.5 billion offer, the person said.
($1 = 3.1260 reais)
(Reporting by Tatiana Bautzer; Editing by Guillermo Parra-Bernal; editing by Grant McCool)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)