French dairy giant Lactalis Group failed in its effort to buy out the remaining minority shareholders of Parmalat PLT 3.87% SpA prolonging its attempt to privatize the Italian company six years after it initially launched its contentious takeover.
The setback is the latest twist in a long-running battle that initially pitted big business against political interests but has more recently become a tussle with some big name shareholders over price.
Last month U.S. money manager Gamco Investors Inc. GBL -1.05% became the latest investor to balk at Lactalis’s bid to buy out the remaining minority shareholders. Amid that opposition the French firm raised its latest bid by about 7% to €682.2 million ($727 million) for the stake it already doesn’t own.
This latest rebuff represents a victory for some of Parmalat’s minority shareholders who have argued for a higher tender offer in part to recognize the full potential benefits of acquisitions made by Parmalat since 2014. That includes Lactalis’ $578.8 million purchase through Parmalat of the dairy operations of Brazilian food company BRF SA BRFS +0.93% .
Lactalis says it won’t raise its latest offer of €3 a share for Parmalat, which is listed on the Milan stock exchange. Still, Parmalat was recently trading up 2.8% at €3.14 Wednesday, a bet by some investors that the French company will ultimately offer a higher bid.
As the main shareholder of Parmalat, “we will continue to manage Parmalat…according to a long-term industrial strategy,” while ensuring to keep its industrial roots in Italy, Lactalis said in a statement.
Lactalis, a family-owned company whose cheese, milk and other dairy products are sold under such well-known brands, as President and Bridel, currently owns 89.6% of Parmalat. That is up from 87.7% in December when Lactalis launched a voluntary tender offer of €2.80 a share to buy out the Italian subsidiary’s remaining public shareholders. Then in March it raised the offer to EUR3 a share to help ensure it could at least boost its stake to 90%. At that level, Lactalis could appeal to the Italian stock market regulator to acquire the remaining shares, based on a price set by the watchdog.
But the tender offer expired Tuesday without Lactalis reaching that threshold. That means Parmalat will remain listed on the Milan exchange. Lactalis has warned Parmalat’s shareholders that by not tendering, they could struggle in future to trade the stock because of the difficulty potential investors would face acquiring a meaningful holding.
Lactalis’ effort to acquire Parmalat dates back to its original bid to take over the whole company in April 2011. At that time, Lactalis acquired 83.3% of Parmalat amid concerns among Italian government officials and leading business figures that the country could lose a national champion to foreign buyers. Parmalat oversees operations in Europe, the Americas, Africa and Australia.
Lactalis had subsequently increased its Parmalat stake to 87.7% in December 2016 when it initiated its latest tender offer. More recently, some investors have raised concerns that Lactalis has tried to privatize Parmalat while minimizing the premium it pays.
Another reason for investor opposition to Lactalis’ latest tender offer is a continuing legal fight between Parmalat and Citigroup Inc. that stems from the Italian company’s bankruptcy in 2003 when it collapsed under €14 billion of debt. Parmalat subsequently relisted on the Italian exchange in 2005.
Some investors had said that they wanted the Lactalis’ tender offer to include a so-called contingent value right to ensure minority shareholders benefit from any proceeds generated by the legal process. That said, Parmalat is fighting another legal battle against Citigroup that could prove costly to the Italian company if it loses.