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Say cheese! Dairy Crest agrees to around £975mln takeover from Canadian dairy giant

Last updated: 11:10 22 Feb 2019 GMT, First published: 07:53 22 Feb 2019 GMT

Cheese
Dairy Crest chairman Stephen Alexander said the deal represents "compelling value for Dairy Crest Shareholders"

Dairy Crest Group PLC (LON:DCG) is to be swallowed up by Saputo Inc, one of Canada's largest dairies, after agreeing to a takeover offer of around a £975mln (US$1.27bn).

The take-out price of 620p per share in cash for the Cathedral City cheese-to-Clover spreads group represents a premium of about 11.7% to Thursday's closing share price of 555p.  in late morning trading on Friday, Dairy Crest shares were changing hands at 625p.

READ: Dairy Crest maintains full-year outlook as third-quarter sales rise 10%

Commenting on the deal, Dairy Crest chairman Stephen Alexander, said: "The board is unanimously recommending this all-cash offer by Saputo to buy Dairy Crest at an attractive premium, which represents compelling value for Dairy Crest Shareholders.

He added: "The Acquisition should enable Dairy Crest to benefit from Saputo's global expertise and strong financial position to fulfil and accelerate its growth ambitions.”

At the end of January, the UK’s largest dairy company left its outlook for the year unchanged after reporting a 10% rise in third-quarter sales with growth across all key brands.

Dairy Crest said its Cathedral City cheese brand had a particularly good quarter with volume and revenue both up about 10%, supported by new product launches such as flavoured snack bars, lactose-free items and kids’ snacks.

The group had also acknowledged the uncertainty surrounding the UK’s departure from the European Union and the impact of potentially disorderly Brexit could have and said it is stockpiling ingredients to prepare for such an outcome.

Russ Mould, investment director at AJ Bell commented: “Cathedral City-owner Dairy Crest sold its milk business in 2015 to focus on cheese and spreads. Unfortunately, shareholders haven’t been richly rewarded over the past few years with the share price drifting sideways and then downwards.”

He added: “The bid from Canada’s Saputo will be a pleasant surprise to investors who may be smiling like the cat who got the cream at the news.

“The cash offer gives them a chance to get out of a fairly pedestrian business and at a price that hasn’t been seen since September 2017.”

 -- Adds analysts comment, share price --

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