FrieslandCampina invests in the Philippines’ Alaska Milk

The Dutch dairy multinational is to purchase a controlling stake in the Philippines’ Alaska Milk Corporation for $400 million.
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Royal FrieslandCampina, a leading dairy company in the Netherlands, has bought a controlling interest in Philippines-listed Alaska Milk Corporation, one of the country’s biggest dairy companies.

Much of the M&A activity we have seen so far this year has been Chinese and Japanese companies doing outbound acquisitions, but this $400 million deal, which is the biggest M&A transaction in the Philippines so far this year, represents a European company looking at Asia’s potential — after having tested the water earlier by buying a smaller stake.

FrieslandCampina is increasing its stake from about 8.1% to 68.9% through a purchase of 535.7 million shares held by the Uytengsu family, the founders and controlling shareholders of Alaska Milk, at a price per share of up to Ps24 ($0.56), subject to certain pre-closing adjustments. Wilfred Steven Uytengsu will continue to lead Alaska Milk’s management team as president and chief executive officer and will remain a director of the company.

In compliance with regulatory requirements, FrieslandCampina will launch a tender offer for the remaining outstanding publicly traded shares of Alaska Milk, which currently amount to about 276.7 million shares, at a per share price identical to that of the FrieslandCampina’s final purchase price. FrieslandCampina will fund the transaction through short-term debt financing, preserving balance sheet flexibility. The transaction is expected to close around May 2012 and is subject to customary closing conditions, including receipt of certain regulatory approvals.

FrieslandCampina was advised by J.P. Morgan and the Uytengsu Family was advised by Houlihan Lokey.

Deal rationale
From FrieslandCampina’s perspective it’s a good deal — with this acquisition FrieslandCampina adds a young and increasingly affluent market of approximately 100 million consumers to its existing consumer base. And it will strengthen FrieslandCampina’s position in Asia, which is a strategic growth area for the dairy multinational. FrieslandCampina is already present in Thailand, Indonesia, Malaysia, China, Vietnam, India, Hong Kong and Singapore. The company’s consumer products international division also produces and sells dairy products in the Middle East and Africa (in particular in Nigeria and surrounding countries), and its annual global revenues will increase from approximately €2.5 billion to nearly €2.7 billion.

For Alaska Milk, which has emerged as the leading player in the Philippine milk industry and employs more than a thousand people, the deal enables the founding family to monetise its investment while at the same time makes the company a global player. The deal will create the largest local dairy company in the Philippines (in terms of combined market share, according to Datamonitor). Nestle will have the second largest market share and San Miguel the third. Observers add that the transaction will introduce new R&D and technology to the local system and will improve food safety and security of the milk processing. Plus, the company will introduce value-added dairy products such as cheese and ice cream.

“We expect this historical agreement to propel Alaska Milk to its next stage of growth and that the products developed by FrieslandCampina will strengthen our positions in all dairy categories. The intended integration will provide Alaska Milk with access to an international dairy company that has production plants in 25 countries and with products that are sold in over 100 countries worldwide. Most notably, FrieslandCampina’s growing commitment to the Philippines is a vote of confidence for our country and its bright prospects,” said Uytengsu of Alaska Milk.

“Adding Alaska Milk gives us a strong, high-growth platform in the Philippines,” said Cees ‘t Hart, chief executive officer of Royal FrieslandCampina. “It also confirms our international ambition to enter markets where FrieslandCampina can create value. Alaska Milk’s management has already built up an outstanding position in the Philippine market. Together we can expand this position by introducing tried and tested FrieslandCampina concepts that have been successful in other parts of the world.”

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