France’s Lactalis to acquire Romanian dairy producer Albalact

France’s Lactalis to acquire Romanian dairy producer Albalact
By bne IntelliNews January 29, 2016

French dairy group Lactalis has agreed to acquire a 70.3% stake in Albalact, the last major Romanian dairy still owned by local investors in a market now dominated by international giants.

Entrants to the Romanian dairy products market include Danone, Hochland and Royal FrieslandCampina. Despite growing international competition, Albalact is one of the top two suppliers of milk in Romania. The acquisition of Albalact will turn Lactalis, which bought Bucharest-based dairy LaDorna in 2008, into one of the largest players on the market.

Lactalis has reached agreement with Albalact’s owners - the Ciurtin family and three Cyprus-based firms of which two are owned by the family - with a view to acquiring their shares, Albalact announced in a January 28 note published on the Bucharest stock exchange’s website.

The three Cyprus-based companies selling their participations in Albalact are Crisware Holdings Limited (26.9%), Croniar Holdings Limited (15.7%) and RC2 (Cyprus) Limited (25.4%). In addition to their direct holdings, Raul and Lorena Ciurtin hold a further 3% in their own name.

The note says that based on current data and for illustrative purposes only, the price per share would be RON0.4543 per share – 37% above the January 27 market price. Based on the target price announced by the company, the price for the whole 70.3% stake would be RON203mn (€46mn).

The agreement signed by the shareholders on January 27 is pending approval from the Romanian antitrust authorities. After the approval, Lactalis plans to launch a voluntary takeover bid for the remaining shares.

Albalact was founded in 1971, amid a government drive to develop the local food industry. The company was privatised to the Ciurtin family in 1999.

Since then, the family has invested heavily to develop the business. As well as modenising Albalact’s existing facilities and opening a greenfield factory in Alba county, in 2008 it entered the cheese market through the acquisition of the Raraul Campulung Moldovenesc factory. In 2014, Albalact reported turnover of RON475mn (€107mn).

Its expansion was helped by the success of Fulga UHT milk in 2004, which became one of the best known Romanian brands. An advertising campaign featuring the Fulga cow - with its catchphrase “What a cow I am!” - contributed to an increase of almost 50% in Albalact’s turnover between 2004 and 2005. This was followed by the launch of Zuzu milk in 2006.  

Zuzu now has a market share of 18% in Romania, putting it neck and neck with FrieslandCampina’s Napolact, according to a 2015 Euromonitor report. In addition to milk, Albalact has Romania’s best-selling brand of butter and sour cream, and is the second largest producer of yogurt and cottage cheese.

However, international companies dominate the markets for cheese and yoghurt, where Hochland and Danone respectively have the largest market shares.

Lactalis’ brands include President, Galbani and Lactel. Its La Dorna dairy, acquired from entrepreneur Jean Valvis in 2008, supplies milk, cheese and other dairy products to the Romanian and Greek markets.

Other international investors in Romania include Turkey’s largest diary producer Sütaş which bought the Tnuva factory in Bucharest 2013, and private equity fund SigmaBleyzer which took a majority stake in Covalact in 2007.

According to Euromonitor, milk consumption is expected to continue to rise in Romania, to reach 20 litres per capita by 2020 up from 15 in 2015, though this total does not take into account private sales in rural areas. In addition to the June 2015 cut in the VAT rate to just 9% for food products, growing demand is also attributed to rising living standards.

“The concentration in dairy, confirmed by the Romanian Dairy Industry Association, will increase the competitive battle and the consolidation on top because of the decreasing numbers of less competitive companies,” the report says.