Agropur, Canada's largest dairy cooperative, said today it is acquiring Davisco Foods International, a U.S.-based cheese and dairy ingredients company. This transaction will double Agropur's U.S. processing operations and will increase its global milk intake by 50%. It will also strengthen its position in the North American and international dairy industries.

Earlier this month, Agropur purchased the dairy processing activities of Sobeys and signed long-term supply agreements with it. The value of the transaction, totaling Cdn$356 million includes:
• The purchase of four plants: two located in Edmonton, Alberta (milk - ice cream); one in Winnipeg, Manitoba (milk); and one in Burnaby, British Columbia (milk);
• The licensing of the Lucerne trademark to Agropur for the production and distribution of fluid milk and cream;
• Long-term supply agreements that will come into effect upon the transfer of the facilities to Agropur and expiration of current supply agreements.

The moves confirm what an Agropur executive told Dairy Foods in February. Eric Brunelle, the president of Agropur's St. Paul, Minn.-based Natrel division, said the cooperative’s goal is to be in the top 10 of the world's most important dairies. In the 21st annual Dairy 100 (Dairy Foods’ ranking of North America’s largest dairy processors), Agropur is No. 8, with 2013 revenues of $3.9 billion.

Last week, Agropur Ingredients announced plans to expand its La Crosse, Wis., operation. The development will bring an extra 34,000 square feet to the plant which after completion will total approximately 200,000 square feet. The project includes a new and improved plow blend line and form-fill-seal pouching line, a high-volume twin blender system, a new retail packaging line, racked warehouse storage and four shipping and receiving docks.

Davisco ranks among the largest dairy processors in the United States

Davisco ranks No. 35, reporting 2013 revenues of $990 million. It has plants in Jerome, Idaho; two in LeSueur, Minn.; and two in Lake Norden, S.D. The acquisition also includes an ingredients plant in Nicollet, Minn., a Friendly Confines Cheese Shoppe in Le Sueur, and sales offices located in Eden Prairie, Minn., Shanghai , Singapore and Geneva, Switzerland. Distribution centers are located in Rotterdam, Netherlands; and Tianjin, China. Davisco was this magazine's Exporter of the Year in 2006.

"With over $1 billion in annual sales, this acquisition is by far the largest transaction in Agropur’s 76-year history," said Serge Riendeau, president of Agropur. "This transaction, combined with the most recent ones in Canada, will increase our sales to over $5.4 billion on an annualized basis, and we should reach 12.1 billion pounds of milk processed each year in 41 plants across North America. As a result of this acquisition, the U.S. operations of Agropur should reach the top five cheese and ingredients processors in the United States to even better serve its clients."

"The world dairy industry is consolidating at an accelerated pace and our acquisition of Davisco supports our objective of increasing our global presence," said Robert Coallier, CEO, Agropur. "One of our key business objectives is to pursue strategic acquisitions to diversify our geographic markets and product portfolios. This acquisition, like our other recent ones, will help solidify the development and sustainability of our cooperative by securing a favorable strategic positioning at all national, North American and global levels. To remain a leader in our field, we must pursue and continue development efforts that aim directly at profitable growth," Coallier added.

"I am excited about this opportunity and what it affords our suppliers, customers and most importantly, our employees," said Jon Davis, Davisco CEO. "Davisco and Agropur have built, over 70 years, very similar cultures. Along with all of Davisco's management team, I look forward to becoming part of the Agropur family and I am very excited about what the future holds. These are exciting times, and it will be a tremendous pleasure and an honor to be part of Agropur going forward," he added.

The International Dairy Foods Associaiton honored Davis in January of this year (see photo,above) for his service to the associaiton. He was chairman of the National Cheese Institute from 2011 to 2013.

"This acquisition increases in an important way our capacity to meet our clients' needs for cheese and dairy ingredients in the U.S.," concluded Agropur's USA Cheese and ingredients Division, Doug Simon.

Headquartered in Le Sueur, Minnesota, Davisco processes 3.8 billion pounds (1.7 billion liters) of milk annually and has 900 employees. Davisco produces over 170 million Kg (375 million pounds) of cheese and 80 million Kg (180 million pounds) of whey ingredients annually.

Agropur will finance the total consideration from existing cash resources and new credit facilities fully-underwritten by the Co-Lead Arrangers and Joint Bookrunners Desjardins Capital Markets, BMO Capital Markets and Rabobank. Desjardins Capital Markets acted as financial advisor to Agropur.

The acquisition is targeted to close Aug. 1, 2014, subject to satisfaction of customary closing conditions.