Dairy co-operative giant Agropur is set to build its milk muscle in Western Canada with a $356 million play for Sobeys’ former Canada Safeway milk processing plants.
Quebec-based Agropur and Nova Scotia-based Sobeys on Tuesday announced a “strategic partnership” agreement in which Agropur will buy the four plants, supply Canada’s Sobeys, IGA and Safeway retail chains with milk, yogurt and ice cream, and use the Safeway chain’s Lucerne brand and trademarks under license.
The deal “will confirm our leadership position in the Canadian milk industry, for the greater benefit of all of our members‑producers and owners,” Agropur president Serge Riendeau said in the co-op’s release.
The four facilities include separate milk and ice cream plants in Edmonton, a milk plant in Winnipeg and a milk plant in Burnaby, B.C. Together, the plants have 281 employees and process over 160 million litres of milk per year.
“Thanks to the business related to these assets and the renewal of certain contracts, the acquisition of the plants represents revenues totalling over $400 million and sees us accelerate our growth in the Canadian market,” Agropur CEO Robert Coallier said in the same release.
The new “long-term” milk, yogurt and ice cream supply agreements will come into effect on the facilities’ completed transfer to Agropur, and on expiry of Agropur’s current supply agreements to provide store-brand dairy goods to the retail chains.
The new agreements will see Agropur supply Lucerne milk, ice cream and yogurt to the company’s Safeway stores in Western Canada — and to Sobeys and IGA, which will now also sell milk and dairy goods under Safeway’s Lucerne brand.
The deal — which is subject to the “usual regulatory approvals” from bodies such as the federal Competition Bureau — also includes a “long-term, national supply agreement” for private-label “natural” cheese.
The dairy processing business and Lucerne brand came to Sobeys through its takeover of Canada Safeway’s stores and operations across Western Canada last November.
Sobeys’ Lucerne cheese and ice cream plant in Winnipeg is not part of the Agropur deal. According to Unifor, the union representing the plant’s workers, the staff were told in March that Sobeys will permanently shut the plant at the end of August.
“This agreement maximizes the value for these assets while securing long-term supply agreements that create synergies for our entire Canadian business,” Sobeys CEO Marc Poulin said Tuesday in a separate release.
“It also ensures that these facilities will continue to produce the very popular Lucerne dairy brand, which will not only remain available in our Safeway banner stores, but will be expanded to our network of Sobeys and IGA stores throughout the West.”
Sobeys said it expects the deal to be “neutral to slightly accretive” on a net earnings basis and will put the deal’s proceeds toward debt repayment.
The deal continues an aggressive expansion track for the Agropur co-operative, whose own brands include Natrel, Quebon, Allegro, Island Farms and — through its Ultima joint venture — Iogo and Olympic. The co-op last month wrapped up a deal to take over New Brunswick butter co-operative Dairytown Products.
Agropur’s mergers and purchases across Canada in 2013 alone took in Atlantic Canada’s Farmers Co-operative Dairy and Central Dairies, Nova Scotia’s Cook’s Dairy, Quebec cheesemakers Fromagerie Damafro and Fromagerie Clement and B.C. ice cream maker Coast Mountain Dairy. — AGCanada.com Network