Parmalat’s play for Kraft cheeses clears regulators

Dairy giant Parmalat’s proposed $1.62 billion deal for Kraft Heinz’s “natural” cheese business in Canada has cleared federal antitrust regulators.

The federal Competition Bureau on Thursday said it issued a “no action letter” to the two companies and would put up a position statement detailing its reasons in the “coming days.”

The deal is expected to give Milan-based Parmalat ownership of three natural cheese brands in the Canadian market: Cracker Barrel, aMOOza! and P’tit Quebec.

That brand portfolio carries “high added value” in the Canadian market, Parmalat said in November when it announced the deal, and would allow it to leverage Cracker Barrel as a complementary brand to its own Black Diamond natural cheese.

Parmalat’s other dairy brands in Canada today include Beatrice, Lactantia, Astro and Balderson. It said in November the deal will allow it to “improve its positioning throughout Canada, with particular reference to Quebec, a region in which Parmalat Group currently has a limited penetration, and to other areas of the country in which the group is not present.”

The deal also gives Parmalat the Kraft Heinz cheese processing plant at Ingleside, Ont., about 85 km southeast of Ottawa, and its “relevant volumes of milk quotas.” The plant today employs about 400 people, who would become Parmalat staff when the deal closes.

The Competition Bureau reiterated Thursday its mandate includes reviewing mergers and acquisitions such as this one to see whether they’re likely to result in a “substantial lessening or prevention of competition.”

The bureau also noted that, for the first time in such a review since federal amendments to the Competition Act in 2009, it obtained a federal court order requiring executives of the two companies to be interviewed under oath by bureau investigators.

The bureau said its review gathered evidence and information from “key market participants” including grocery retailers, food service companies, regulators, industry associations and cheese processors.

Kraft Heinz CEO Bernardo Hees, in a separate release in November, said the deal will allow the U.S. company to “focus on the segments and categories where we have stronger brand equity, competitive advantage and greater growth prospects.”

Kraft Heinz’s cheese market space in Canada still includes brands such as Philadelphia, Cheez Whiz and Kraft Singles, made at Mount Royal, Que., where the company employs about 900 people.

Kraft Heinz, which plans to use proceeds from the deal to pay down debt, said in November the cheese business being sold produced about $560 million in net sales in 2017. — Glacier FarmMedia Network

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