In April of this year Global AgInvesting reported that French dairy giant, Lactalis, received approval from the Brazilian government to buy the dairy units of the food processing company, BRF SA.

 

Now, BRF SA has announced that it has agreed to sell its dairy business to Lactalis Groupe for 1.8 billion reais (US$805 million) in a deal that would make the French group the second largest dairy company in the South American country.

 

Lactalis plans to acquire the units through its Parnalat subsidiary, and plans to sell products in not only Brazil, but other emerging markets as well, under the Parmalat brand.

 

Consumption of dairy products in Brazil is still comparatively low to other developed countries, indicating to Lactalis that the market has ample room for growth. Indeed, Brazil’s dairy market increased in value from 56.2 billion reais (US$14.5 billion) in 2012 to 62 billion reais (US$15.9 billion) in 2013.

 

The Wall Street Journal reports that BRF announced its intentions to sell its dairy units earlier this year, as the group shifted its plans to focus its energies on its meat business and pursuing overseas expansion since Abilio Diniz became chairman in early 2013.

 

Lactalis has a presence in 145 countries, but has recently been working to make inroads into Brazil, which is one of the largest dairy producing counties in the world. At the end of August, it offered 250 million reais (US$64.3 million) to acquire four units of the Brazilian dairy, LBR-Lácteos Brasil, which is currently involved in bankruptcy proceedings, and has gain approval to use the Parmalat brand name in the country, according to Marcelo Ricupero, a lawyer with Mattos Filho, working on the LBR deal.

 

Although Lactalis’ offer for LBR still needs to gain clearance from a bankruptcy judge, Lactalis is advancing the acquisition process by preparing to request approval for the deal from the Brazilian anti-trust agency.