Dairy Crest, the UK dairy processor based in the southeast of England, is set to be acquired by Saputo, the privately owned Canadian dairy company, in a £975m (€1.1bn) deal.

Dairy Crest announced to stock markets on Friday morning that it had agreed a deal with Saputo that would see the Canadian company pay a cash amount of £6.20 per share to acquire the Dairy Crest business outright.

Saputo is one of the 10 largest dairy companies in the world with annual sales of €8bn and profits of €845m.

An acquisition price of £6.20 per share is a premium of almost 12% on the most recent Dairy Crest share price, which was trading around the £5.55 mark. The deal is subject to approval from Dairy Crest shareholders. The board of directors in Dairy Crest is urging shareholders to vote in favour of the buyout.

Brands

Dairy Crest is one of the largest dairy companies in the UK and owns some of the best known and premium butter and cheese brands in the UK retail market, including Cathedral City cheese, Country Life butter and Clover butter. The company also owns the Frylight cooking oils brand.

The Cathedral City cheddar brand is the UK’s 16th largest grocery brand, and accounts for more than 50% of branded cheddar sales in the UK. Almost 60% of UK households buy the product each year.

Dairy Crest recently announced plans to invest £75m (€86m) to expand cheddar capacity by 40% at its Davidstow Creamery in North Cornwall. This will see it add 23,000t of cheddar production to its current 54,000t capacity and allow the group to process an extra 200m litres of milk.

Lino Saputo, the owner and CEO of Saputo Dairy, said Dairy Crest was an attractive acquisition target for his company as it offers significant growth opportunities. If the deal wins shareholder approval it will be the first time Saputo has entered the UK dairy market.

“We believe that under Saputo ownership, Dairy Crest will be able to accelerate its long-term growth and business development potential and provide benefits to Dairy Crest's employees and stakeholders,” said Saputo.

Premium

Stephen Alexander, chair of Dairy Crest, is urging shareholders to vote in favour of the proposal.

“The board is unanimously recommending this all-cash offer by Saputo to buy Dairy Crest at an attractive premium, which represents compelling value for Dairy Crest Shareholders,” said Alexander.

“Dairy Crest is a leading UK dairy company and the proud manufacturer of Cathedral City, the largest UK cheese brand. Saputo is one of the top 10 dairy processors in the world. Both companies have built strong positions in the cheese sectors in their respective home markets,” he added.