Its non-binding, E£65.00 (US$9.09, €7.03) per share offer for Cairo-based Arab Dairy, which is listed on the Egyptian Exchange, was made public earlier today.
The European dairy cooperative has now entered a period of “due diligence” to assess the “more sensitive aspects of Arab Dairy’s business which are not published in its annual reports.”
If found to be “sound and healthy” and Arab Dairy shareholders accept its E£65.00 offer, Arla will become one of Egypt’s leading cheese makers.
"The company seems well-aligned with our ambitions in the Egypt, and we are now looking at the details before deciding whether or not to actually purchase a share of the business,” said Rasmus Malmbak Kjeldsen, senior vice president for the Middle East and Africa, Arla Foods.
The Egyptian private equity firm , which holds a 24% stake in Arab Dairy, issued a E£56 (US$7.82, €6.05) per share takeover bid in August 2014.
Arla is, however, facing competition to acquire Arab Dairy from Pioneers Holding.
Arla appears unconcerned, however, by the much lower rival bid.
“We are aware of other bidders,” an Arla spokesperson told DairyReporter.com when pressed about the Pioneers Holding offer.
“We believe we have a good offer. Theirs is E£56, ours is E£65.”
“Now it’s up to the Arab Dairy shareholders to decide.”
"Considerable potential"
Arab Dairy currently holds, according to Euromonitor data, the seventh largest share of the Egyptian cheese market, which is forecast to produce US$843.9m (€652m) in sales in 2014.
Specializing in feta, Swiss, mozzarella and processed cheese, Arab Dairy is best know for its Panda cheese brand.
As well as marketing its products in Egypt, Arab Dairy, established in 1985, exports to Lebanon, Libya, Jordan, Yemen, Kuwait, Iraq, Saudi Arabia, Qatar, Bahrain, UAE, Syria, Albania, South Africa, and the US.
Its Egyptian production is based on recombining, where water is added to milk powder and then processed into cheese.
The fact that around 80% of this milk powder is imported into Egypt represents a significant supply opportunity for Arla.
“Consequently, there is considerable potential for using milk supplied by owners in value-added products which we can sell in a growing market,” said Kjeldsen.
In September 2013, following the establishment of its Ivorian distribution partnership with Mata Holdings, Arla's Theis Brøgger told DairyReporter.com to expect more “activity” from the company in Africa.