Dutch company gives up acquisition of Serbian dairy companies - Campina claims it has nothing to do with politics, Imlek complains about price

The Dutch company Royal FrieslandCampina announced Tuesday (22 May 2012) that it had given up the acquisition of Belgrade-based Imlek and Mlekara Subotica, which are owned by Danube Foods Group.

Danube Foods Group, which is managed by the investment fund Salfor, has released a brief statement saying that the negotiations on this acquisition have been discontinued because "the two companies failed to reach a satisfactory agreement on the transaction."

Given that these companies signed a Memorandum of Understanding regarding the takeover of aforementioned two dairy companies in Serbia back on 2 February 2012 and that the Serbian Competition Authority approved their acquisition by Campina in late April, it is clear that this news has come "like a bolt from the blue."

As Jan-Willem ter Avest from Royal FrieslandCampina said in an exclusive statement to eKapija, the only reason why they gave up that acquisition is the fact that the companies failed to agree on transaction terms, although they were defined by the Memorandum of Understanding.

- We are very sorry about that because a team of people within and outside the company has been working very hard on this project. Although we doubt that there is a chance for the negotiations to continue in the near future, we are still interested in this acquisition, but only under acceptable terms - Ter Avest told our web portal.

When asked why they had waited so long to announce the agreement termination, Ter Avest replied that "the negotiations lasted for so long because of the fact that there was no agreement on final terms."

- After a due dilligence process, there are always specific issues you must agree upon with the other side in the final agreement. In that period we also waited for the competent authorities to give their consent for the acquisition - said Ter Avest.

On the other hand, Imlek CEO Slobodan Petrovic told Novosti that they had failed to agree on the price, that the negotiations had lasted too long and that they had finally decided to put an end to that. As he pointed out, there are no other potential strategic partners for now.

"Long-lasting negotiations hit the wall because the Dutch company tried several times to lower the prices of these dairy companies. The owners of Salford were even ready to lose some money in this transaction by accepting to sell the two dairies for dinars. However, a new problem occurred when FrieslandCampina again tried to go cheaper," Novosti writes.

Politics is (not) the reason

Given that it's not even been two days since Tomislav Nikolic was elected the new president of Serbia, which came as a surprise to many, speculation emerged that the acquisition of Serbian dairy companies was abandoned for "political reasons."

Nevertheless, Ter Avest strongly denied such allegations.

- This joint decision of ours has nothing to do with the current political situation.

When asked if Campina was maybe interested in buying some other company in the region, Jan-Willem ter Avest replied:

- Royal FrieslandCampina will continue to seek opportunities that will help it implement its 2020 business strategy, whose aim is sustainable development. Southeast Europe remains a very important pillar of that strategy. At this moment, this is all we can say.

Imlek shares sink

The news that Royal FrieslandCampina and Danube Foods Group failed to reach an agreement hit brokers the most. At lightning speed, the clients of almost all broker companies we've contacted started to ask for more details.

As it was expected, the price of Imlek shares dropped 7.18% to RSD 2,780.

- It is for sure that this news will have a negative effect on the share price for a short time, a proof of which is today's trading. However, given that the company is for sale and that it is possible that it will be sold either to the existing potential buyer or a new one, we can expect the price to return to the level it reached when the Memorandum of Understanding regarding the acquisition of Imlek and Mlekara Subotica was signed – Milivoje Knezevic, portfolio manager and manager of the Analysis Division at MV Investments, told eKapija.

Knezevic did not rule out a renewal of negotiations with the previous potential buyer "since both sides spent much time and money to successfully complete this acquisition."

Consolidation of Danube Foods Group ahead?

People at Danube Foods Group, which owns Imlek, Mlekara Subotica, Bambi Banat and Knjaz Milos, were not ready to comment in more details on Campina's decision to give up the acquisition. A brief statement issued by DFG reads that the group "is considering the possibility of further consolidation of the food and beverage industry with Imlek as the anchor of further integration."

Imlek and Mlekara Subotica together serve a market of about 25 million consumers. Their total annual revenue amounts to approximately EUR 270 million. These dairy companies employ about 1,470 people at six production plants and four offices situated in Serbia, Bosnia-Herzegovina and Macedonia.

Jelena Djelic