Saputo: Morningstar acquisition ‘opened up dairy world’
by Eric Schroeder
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MONTREAL — Lino Saputo, vice-chairman and chief executive officer of Saputo Inc., believes the Montreal-based company “got the jewel in the old Dean Foods system” when it acquired Morningstar Foods, L.L.C., a subsidiary of Dallas-based Dean Foods, for $1.45 billion in January.
In a Feb. 13 conference call with financial analysts to discuss third-quarter results, Mr. Saputo said the company sees the value in Morningstar Foods coming from two different platforms in the United States.
“One, which is a cheese platform, that still has a great opportunity for growth, growth either organically and/or through acquisitions,” Mr. Saputo said. “And now a new platform with products that are dairy-oriented products, but not products that we had been historically producing or processing in the U.S. — things like the ice cream mixes to some customers that are very familiar to us north of the border. When you look at creamers and non-dairy creamers — products very familiar to us north of the border, now we have those products and those plants and that infrastructure in the U.S.
“Sour cream, cottage cheese — again, we are leaders in Canada in those categories of product, and now with the Friendship brands we have an opportunity to sell those products at retail in the U.S.
“So, again, if you’re thinking about synergies or cost reductions, perhaps not a lot of opportunity as we may have seen in the Land O’ Lakes or Alto acquisitions. But in terms of opportunity or just ability for us to consider other assets in the U.S. for acquisition that would be easy to tuck into either Morningstar or Saputo Cheese USA, I think we’ve just opened up the dairy world for ourselves to be able to consider other acquisitions and more product categories.”
The combined business will have about 12,000 employees, 57 manufacturing facilities in five countries and combined annual revenue of about $8.7 billion. Morningstar produces dairy and non-dairy extended shelf-life products as well as cultured products.
Mr. Saputo responded to questions about future acquisitions — either in the United States or elsewhere — by saying the company has an “appetite” if the opportunity presents itself.
“Our management team is well aware of our desire to grow through acquisitions,” he explained. “… If there are other opportunities for us to make acquisitions in the U.S. that would further complement Morningstar we’re prepared to make those acquisitions. The same could be said for Saputo Cheese USA…. We’re not afraid to invest in our business, whether that would be through capital expenditure, return on investment type of initiatives or, again, through acquisitions for specialty-oriented platforms that would further complement DCI.
“So, again, I think as we move forward, we further strengthen our platform. I’ve been asked a question many times before, how do I see Saputo’s future? I see us bigger, I see us better, and I see us stronger. And I’m even more optimistic today than I’ve ever been before in terms of our ability to materialize other acquisitions and continue to grow every single one of our platforms.”
Net earnings at Saputo Inc. in the third quarter ended Dec. 31, 2012, totaled C$130 million ($129.8 million), equal to C$0.66 per share on the common stock, down narrowly from C$129.8 million in the same period a year ago. Revenues were C$1,800.6 million ($1,798.4 million), up from C$1,796.5 million. For the nine months ended Dec. 31, earnings were C$381.5 million, or C$1.93 per share, down from C$383.4 million, or C$1.89 per share, in the same period a year ago. Revenues in the nine months were C$5,244.4 million, up from C$5,226.9 million.