Italy's Parmalat defends valuation of U.S. dairy buy
MILAN (Reuters) - Parmalat SpA (PLT.MI) on Thursday defended its acquisition of Lactalis American Group, which some shareholders had criticized as too expensive, by saying that the U.S. company's 2012 earnings justify the $900 million acquisition price.
Parmalat was replying in a statement to a report in an Italian newspaper that questioned the price of the acquisition, which was completed in July. The deal is also at the centre of a judicial probe in Italy.
The Italian dairy company said year-end EBITDA forecasts for Lactalis American Group were in a range of $90 million to $95 million, which it said justified the price tag of the controversial deal.
Parmalat, which is majority-owned by French cheesemaker Lactalis, agreed in May to buy Lactalis American Group for $904 million, or 9.5 times the 2012 EBITDA forecast of $95 million.
Under terms of the deal, the final price of the acquisition will depend on the U.S. group EBITDA performance this year.
In its statement, Parmalat said the U.S. company's EBITDA was below budget after the first half of this year but had picked up in the third and fourth quarters.
"Based on the considerations outlined above, year-end EBITDA projections fall within a range of $90 to $95 million," it said.
It said that the U.S. group's marketing expenses for 2012 were expected to be 33 percent lower than in the budget but said this was because of greater efficiency in spending for advertising and other expenses.
"Parmalat has been given a specific guarantee, set forth in the purchase contract, suitable for ensuring that any artificial reductions in marketing expenses could not in any way have an impact on the correct determination of the price adjustment," it said.
Italy's market regulator, Consob, and Parmalat's minority shareholders have criticized the acquisition of Parmalat's U.S. sister unit, a cheese manufacturer, by saying it drained the Italian company of cash. Prosecutors in Parma have opened a probe of alleged embezzlement.
Lactalis, owned by the Besnier family, owns 83 percent of Parmalat after a 4.3 billion-euro ($5.6 billion) takeover last year.
Parmalat has repeatedly defended the U.S. deal, saying it was made in the interest of the company and at a fair price.