Arla Foods Makes Non-binding Bid For Egyptian Dairy
Arla Foods is making a non-binding bid for a majority stake in Arab Dairy Products Company, a listed company based near Cairo in Egypt. If successful, the deal will make Arla one of the top five or six players in the Egyptian dairy sector. A due diligence phase is now commencing, where Arla, after having made a non-binding bid for up to 100 per cent of the shares, has access to detailed information about the more sensitive aspects of Arab Dairy’s business which are not published in its annual reports.
“Our bid is non-binding, but has now become official because Arab Dairy is listed on the Egyptian Exchange. The company seems well-aligned with our ambitions in Egypt, and we are now looking at the details before deciding whether or not to actually purchase a share of the business,” says Rasmus Malmbak Kjeldsen, Senior Vice President for Arla’s business in Middle East & Africa.
Arab Dairy has a strong position in both the retail sector and food service, which ties in well with Arla’s focus on these particular sales channels. The acquisition would give Arla a market share of 13-15% in the cheese categories.
Arab Dairy sold 43,000 tonnes of dairy products in 2013 and is ranked in the top four in several of main categories, primarily feta-like cheese, processed cheese and yellow cheese. It has a production capacity 80,000 tonnes at its modernised facility 50 km outside Cairo – with land for possible extension.
“Arab Dairy’s local production is based on recombining, where water is added to milk powder and then processed into cheese. Approx. 80 per cent of this milk powder is imported to Egypt. Consequently, there is considerable potential for using milk supplied by owners in value-added products which we can sell in a growing market,” says Rasmus Malmbak Kjeldsen.
Egypt is one of the biggest dairy markets in the Middle East and North Africa, a region that has a lot in common when it comes to dairy consumption. The Egyptian population totals almost 90 million people and, like their purchasing power, it continues to grow. In addition, many consumers are moving away from dairy products produced at home or locally to eating products manufactured and packed at commercial dairies and bought in shops.
