Creamed off: Dairy Crest to be bought for £1bn

Country Life owner boasts of strength in face of Brexit as it recommends bid by Canadian giant to investors

DAIRY Crest, the Country Life butter and Cathedral City cheese maker, is to be snapped up in a near £1bn deal after a Canadian dairy giant dismissed Brexit fears to make its first foray into the UK.

Dairy Crest told shareholders it recommended the 620p-a-share bid from Montreal-based Saputo, which values the company at £975m.

Mark Allen, chief executive, said that it was a “straightforward” cash deal that did not need competition approvals and gave certainty for shareholders, pensioners and 300-plus dairy farmers. Mr Allen, who has been with the business for almost three decades and has been chief executive for the last 12 years, is in line for a £4.8m windfall based on owning 767,342 shares that will be cashed in the deal.

The bid represents a 35pc premium to Dairy Crest’s share price a month ago, although shares in the cheddar maker soared by 13.6pc yesterday to trade above the offer price at 630p.

The $16bn (£10bn) Canadian company has committed to not making any “material changes” to how the company is run and said it has no plans to close factories or alter agreements with Dairy Crest’s farmers in Devon and Cornwall. Saputo, which is also the second largest dairy producer in Argentina and the biggest processor in Australia, has expanded rapidly, sealing 30 acquisitions in 20 years, although this is its first deal in Europe.

The Canadian group said that it had been motivated to “enter the UK market by acquiring and investing in a well-established industry player”.

Mr Allen revealed that takeover negotiations with Saputo had only begun at the start of the year, following initial conversations about Dairy Crest expanding in the US. The deal is due to complete by April, subject to shareholders voting in favour of it.

The Dairy Crest boss said that despite the deal being struck just a month before the UK’S withdrawal from the European Union there were no conditions relating to Brexit.

“We can speculate about currency going up or down but we have a fabulous stable of brands and that is what Saputo is buying,” he said.

The City has been braced for a slowdown in deals while bankers have cautioned that few overseas companies will want to invest in UK businesses while there is so much uncertainty. But Mr Allen said he believed that Dairy Crest was “a fantastic business that will stand on its own two feet whatever happens with Brexit”.

Richard Marwood, fund manager at Royal London, which has a 5.2pc stake in Dairy Crest making it its third largest shareholder, said: “This deal shows that, contrary to what some people fear with Brexit, UK companies with interesting brands, technology or market positions, still have significant attractions to foreign acquirers.”

Jefferies analyst Martin Deboo said that Saputo’s takeover was an opportunistic move as London-listed food companies had been oversold by investors. “Dairy Crest is a defensive stock because whatever happens with Brexit people are not going to stop buying cheese,” he added. However, he said that Dairy Crest was still receiving a fair takeover premium that was higher than the average recent food takeover.

Russ Mould, investment director at AJ Bell, said the offer was a pleasant surprise for investors, giving them “a chance to get out of a fairly pedestrian business and at a price that hasn’t been seen since September 2017”.

Last year Dairy Crest raised £70m from shareholders to fund its international expansion.

The Surrey-based company was founded in 1933 and has more than 1,000 employees in seven locations.