France-headquartered Global dairy major Lactalis will buy Mumbai-based Prabhat’s milk business in its third acquisition in India.
Prabhat told the stock exchanges on Monday that Lactalis’ Indian subsidiary Tirumala Milk Products was acquiring its dairy business for Rs 1,700 crore, which is 1.09 times its FY18 sales of Rs 1,554 crore. The transaction is subject to mandatory approvals. The company did not specify a timeline for completion of the deal, but analysts expect it to be done in the next six months.
At Monday’s closing price of Rs 93.05 per share, Prabhat’s market capitalisation stands at Rs 909 crore. Kotak Mahindra Capital Company was the financial advisor to Prabhat on the deal. Veritas acted as the legal advisor.
Besides the dairy business, the transaction also involves sale of 100 per cent shareholding in Sunfresh Agro Industries, a step-downsubsidiary of Prabhat, via a share purchase agreement, the company said.
Prabhat will now focus on its cattle field and animal genetics business with the sale of its dairy business.
Earlier this month, Prabhat had tied up with Denmark-based DLG Group as part of its plans to foray into the animal nutrition business. The company had been looking to offload its dairy business for some time now, said experts tracking the market, and was in talks with Tata Global Beverages last year for a possible sale at Rs 400 crore. That did not come through though.
Raviraj Vahadane, chief financial officer of Prabhat Dairy, said, the acquisition represented a meaningful opportunity for the employees of the company to be associated with one of the global leaders in the dairy products business.
The company intended to share a substantial portion of the proceeds from the sale with shareholders after meeting its tax and transaction cost obligations, he said.
For Lactalis, the acquisition of Prabhat’s dairy business is its fifth in five years. In January of 2014, the company had bought South India’s second-largest dairy company Tirumala Milk for Rs 1,750 crore. It then snapped up the dairy business of Indore-based Anik Industries for Rs 470 crore in March of 2016, indicating that it was ready for more.