U.S. food processing giant Kraft Heinz is taking one step back from the Canadian dairy processing business with a deal to sell its eastern Ontario cheese plant and the brands made there.
The company announced Nov. 6 it has a deal in hand to sell its Canadian “natural cheese” business and its cheese plant at Ingleside, Ont. to global dairy giant Parmalat for $1.62 billion.
The deal would see Kraft Heinz’s 400 employees at Ingleside, about 85 km southeast of Ottawa, transfer to Parmalat and continue to make Cracker Barrel, P’tit Quebec and aMOOza cheeses for the Canadian market.
The Canadian natural cheese business and brands produced net sales of about $560 million in 2017, Kraft Heinz said.
Parmalat is “uniquely positioned to advance the natural cheese business given their experience and focus on the dairy industry,” Kraft Heinz CEO Bernardo Hees said in a release.
“At the same time, we can focus on the segments and categories where we have stronger brand equity, competitive advantage and greater growth prospects.”
Said categories include processed cheese products such as Philadelphia, Cheez Whiz and Kraft Singles, which Kraft Heinz said it will continue to make and market in Canada at its Mount Royal, Que. facility.
Proceeds from the deal — which is expected to close in the first half of 2019, pending regulatory approvals — will go primarily to pay down debt, Kraft Heinz said. Lower interest costs are expected to offset most of the earnings-per-share dilution from the asset sale.
Milan-based Parmalat said the deal offers “strategic value” by allowing it to leverage the Cracker Barrel brand, complementing its own Black Diamond branded natural cheese brand in Canada, and to “grow in retail channels with higher added value.”
It also offers Parmalat the opportunity to improve its positioning throughout Canada, “with particular reference to Quebec, a region in which Parmalat Group currently has a limited penetration, and to other areas of the country in which the group is not present.”
Parmalat, in a market briefing note, said the deal “coupled with further planned investment” is expected to yield “synergies” with the company’s Canadian manufacturing and distribution network “which in turn could lower costs, will protect jobs and support dairy farm incomes.”
The Ingleside plant “fits well into our current network and helps expand our operations in Eastern Canada,” the company said, noting its own processing facilities in the region — at Winchester and Belleville, Ont. and at Victoriaville, Que. — “will remain open post the closing of this transaction.”
Parmalat, owned by French dairy giant Lactalis, emphasized that “each of the brands in our portfolio, and the brands we will be acquiring, will remain distinct, with its own unique consumer appeal.”
“Today’s announcement speaks volumes about our drive to support dairy farmers, help the local economy and continue to build on our family tradition of cheese making,” Parmalat CEO Mark Taylor said in the briefing note.
“We are excited to work closely with the community and our stakeholders to ensure we can grow sustainably and help Canada’s natural cheese business thrive.” — Glacier FarmMedia Network