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Lactalis, a French dairy products corporation, has entered into a definitive agreement to acquire Mumbai-based Prabhat Dairy’s milk processing business for about Rs 1,700 crore. The French group will be making the acquisition through its wholly-owned Indian subsidiary, Tirumala Milk Products, by way of a slump sale.
Prabhat Dairy will also sell its entire stake in Sunfresh Agro Industries, a step-down subsidiary, through a share purchase agreement, the company said in a statement.
Following the completion of the deal, Prabhat Dairy intends to further develop its cattle feed business and expand into allied businesses such as animal nutrition and animal genetics. Also read: Prabhat Dairy plans to enter animal nutrition business
“The association with Lactalis – one of world’s largest dairy players - will offer this business a strong platform for accelerated growth momentum in becoming one of the largest private dairy businesses in India,” Vivek Nirmal, Joint Managing Director at Prabhat Dairy said.
The deal is subject to customary conditions and regulatory approvals. “The acquisition of the dairy business undertaking of Prabhat by Lactalis represents a meaningful opportunity for the employees of Prabhat to be associated with one of the global leaders in the dairy products business,” Raviraj Vahadane, Chief Financial Officer at Prabhat Dairy said.
Prabhat Dairy intends to share a substantial portion of the proceeds from the sale with shareholders after meeting its tax and transaction cost obligations. The Indian company’s present promoters Sarangdhar Ramchandra Nirmal, Vivek Nirmal and Nidhi Nirmal will continue to be associated with the business for next two years.
Kotak Mahindra Capital was the financial advisor to Prabhat Dairy, while Veritas Legal was its legal advisor.
Animal nutrition business
Earlier on January 8, Prabhat Dairy had signed a joint development agreement Denmark-based with Dansk Landbrugs Grovvareselskab (officially DLG Group) as part of its plans to foray into animal nutrition business. This includes cattle feed, nutrition supplements and animal genetics. Also read: Prabhat Dairy in strategic alliance with Denmark’s DLG Group
For the Indian firm, this is part of its planned backward integration. Under the agreement, two products have been developed in Denmark and shipped to India under a pilot project, the company said in a statement.
These two products, one for ‘Milking Cow’ and another for ‘Dry Cow’, will be given to 150 selected farms to administer on 1,000 cows for the improvement of health and to increase milk productivity and quality. This pilot phase will be for 4-6 months. Post successful pilot, the company will go in for a commercial launch.
Currently, cattle feed forms a major part of animal nutrition business in India. Prabhat Dairy is a supplier of cattle feed under the brand name ‘Annapurna’ to the farmer community and has been helping them select the right quality of feed to improve milk production and quality.
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