Grupo Lala has agreed to acquire Brazilian dairy producer Vigor for BRL 5.725 billion ($1.84 billion), after the Mexican company’s board approved proposals that were made public on Tuesday.
FoodBev reported that Lala had concluded negotiations with Vigor’s owners, J&F Investimentos, and would recommend an acquisition to its board. It will now convene a conference call with investors to discuss the transaction.
Lala will take a stake of 91.99% in Vigor, and could take its holding to 99.99% with the addition of the 8% currently owned by Arla Foods. The deal also includes a stake in Brazilian dairy company Itambé, which Vigor bought into in 2013.
Grupo Lala CEO Scot Rank said: “We are pleased that Vigor will be the platform for growth of Lala in Brazil. Vigor has the scale, the innovation, and the talent needed to build a profitable, value-added dairy business.”
Analysis: ‘A deal in the making’
J&F Investimentos has had its sights set on selling Vigor for a while now. In March, speculation in the Brazilian press that PepsiCo was lining up a $1.9 billion takeover for Vigor appeared to reaffirm the commitment from the Bautista family – the owners of J&F Investimentos – to offload the business.
That was before JBS – the meat-packing giant also owned by J&F – was drawn into an extensive food corruption probe. Employees from JBS, as well as BRF, were accused of bribing health officials to overlook contaminated or rotten shipments of meat, destined for export markets outside Brazil.
For JBS’ role in the scandal, J&F Investimentos agreed to pay a record $3.2 billion fine, accelerating its desire to reorganise the business and sell its Vigor operation. JBS confirmed in June that it would sell Vigor, as well as its poultry business Moy Park, as part of a divestment plan geared towards reducing debt and strengthening its financial position.
With PepsiCo’s interest having seemingly faded, Vigor will now be passed to Grupo Lala, which has an ideal opportunity to expand its international business further; it gains a strong brand in Vigor, with consumer recognition and a diverse portfolio of products.
It comes a week after Grupo Lala’s second-quarter results showed that it was in a strong financial position: net sales were 16% higher at MXN 14.97 billion ($842.4 million) and gross profit was up 14.6% to MXN 5.79 billion ($325.7 million), driven in part by growth in Lala’s home market of Mexico.
But despite strong domestic performance, the Torreón-based company has sought to grow its business outside of Mexico in recent years. It set up a US operation after acquiring the branded business of Laguna Dairy, and its plans for a $30 million dairy production plant in Guatemala were described as an effort to “consolidate the group’s presence in the Central American region”.
The acquisition of Vigor will play into that wider strategy for international growth.
Vigor is a leading company in the Brazilian dairy market with more than 7,600 employees and 67,000 points of sale in Brazil. It operates 11 milk collection centres, 14 production plants and 31 distribution centres, Grupo Lala said, with brands including Vigor, Danubio and Faixa Azul.
Vigor also makes Serrabella cheese, Leco juices and flavoured milks, and Amelia – a range of baking products including Chantilly cream, margarine and pastries.
The business is celebrating its centenary this year.
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