- Investment could cost about $500 million based on share prices
- Deal would help Dutch company capture processed milk market
Royal FrieslandCampina NV, a Dutch dairy company, is seeking to buy a 51 percent stake in Engro Foods Ltd. of Pakistan in a deal that would help tap a market where consumers mainly drink unprocessed raw milk.
The European dairy company approached Pakistan’s second-biggest listed dairy firm to buy about 391 million shares from its parent Engro Corp. and may start due diligence shortly, the Asian company said in a stock exchange filing Thursday. The deal could cost the company about $500 million, based on Thursday’s share price.
The acquisition would help the Dutch company to gain a footprint in Pakistan where a growing middle class is buying more processed milk and most people boil the raw liquid before consuming it. Only 9 percent of milk sold in the country is processed and this could reach as much as 15 percent in five years, Engro Foods Chief Executive Officer Babar Sultan said in an interview in December.
“The potential is huge and an untapped market exists when it comes to processed milk,” said Danish Ali Kazmi, senior research analyst at Alfalah Securities Ltd. The deal will provide “FrieslandCampina with a lucrative opportunity to capture the market,” he said.
Frieslandcampina spokesman Jan-Willem ter Avest declined to comment beyond the stock exchange announcement.
Shares for Karachi-based Engro Foods and parent Engro Corp. rose by their daily limits of five percent following the announcement.
Engro Corp. holds more than 87 percent in its wholly-owned foods subsidiary, according to the statement. Citigroup Global Markets Ltd. in London is the financial adviser to the deal, while the Pakistan unit of the bank is the manager, the company said.