DALLAS–(BUSINESS WIRE)–Feb. 24, 2000–Suiza Foods Corporation (NYSE:SZA) announced today that it has acquired a majority interest in Spanish dairy processor, Leche Celta, S.A.
Leche Celta, which had sales of approximately $150 million in 1999, produces primarily ultra-high temperature (“UHT”) dairy products from three plants located in the Galicia and Cantabria regions of Spain. Leche Celta, the fourth largest fluid dairy processor in Spain, sells it products throughout Spain primarily under the popular Celta brand.
“After more than a year of careful study and analysis, we have decided to make a targeted investment in the highly attractive Spanish market,” said Gregg Engles, Chairman and Chief Executive Officer of Suiza, “and we are very excited to enter that market with the acquisition of Leche Celta. The European market offers Suiza a new forum for growth. Also, we believe that a European presence will afford us greater access to European advances in UHT technology, and will better align us with large retail customers, many of whom also have operations in Europe.”
Mr. Engles continued, “Iberia is Europe’s third largest fluid milk market behind the U.K. and Germany, and Leche Celta is a leader in that market with a fine reputation as a quality producer of dairy products, excellent facilities and outstanding management. The Iberian dairy industry is fragmented, stable and mature, and we believe that Leche Celta is well positioned to benefit from predicted consolidation in the Iberian market.”
Suiza purchased its interest in Leche Celta from Antonio Marchal, founder of the company. Mr. Marchal, with 35 years of experience in the Spanish dairy industry, has retained a minority interest in Leche Celta, and will continue to operate Leche Celta as general manager.
Said Mr. Engles, “We are also very pleased to be joining forces with Antonio Marchal, an outstanding operator with a strong entrepenurial spirit. Under Mr. Marchal’s direction, Leche Celta has grown to be a leader in its market, with a highly competitive cost structure. We expect Leche Celta and Mr. Marchal to be important contributors to our future growth and profitability.”
Suiza also announced today that it has agreed to sell Ferembal S.A., its metal packaging business headquartered in Clichy, France, to Impress Metal Packaging Holdings, B.V., one of the leading European providers of metal can products.
Suiza will receive net proceeds from the transaction approximately equal to its investment in Ferembal. Suiza intends to use a portion of the cash proceeds of the transaction to pay for its approximately $45million equity investment in Leche Celta. The balance of the proceeds will be used for reinvestment in its core dairy business and for general corporate purposes.
Ferembal is a subsidiary of Continental Can Company, purchased by Suiza in May 1998. Suiza sold all of Continental Can’s U.S. packaging operations in July 1999, in partial exchange for a minority interest in the purchaser, Consolidated Container Company. The only remaining business of Continental Can is Dixie Union, a small flexible film business based in Kempten, Germany.
The Ferembal transaction is subject to customary closing conditions, including certain European antitrust authorizations, and is expected to close during the first quarter of 2000.
The company estimated that its investment in Leche Celta will be accretive to earnings in 2000 while the sale of Ferembal will be dilutive, and that on a net basis the transactions will have a neutral effect on 2000 earnings.
Suiza Foods Corporation is the nation’s leading dairy processor and distributor, producing a full line of company-branded and customer-branded products. Suiza sells its dairy products under various brands including national brands (such as International Delight(R), Second Nature(R), Naturally Yours(R), Mocha Mix(R), Sun Soy(TM), kidsmilk(TM), fitmilk(TM) and lifemilk(TM)), strong regional brands and partner or licensed brands in certain regions.
Suiza also has holdings in the consumer goods packaging industry.
The following statements made in this press release are “forward-looking” and are made pursuant to the safe harbor provision of the Securities Litigation Reform Act of 1995: the company’s beliefs and expectations that (i) the European market offers a new forum for growth, (2) a European presence will afford it greater access to European advances in UHT technology, (3 having a European presence will better align it with large retail customers, (4) Leche Celta is well positioned to benefit from predicted consolidation in Iberia, (5) Leche Celta and Mr. Marchal will be important contributors to the company’s future growth and profitability, (6) the proposed sale of Ferembal will close during the first quarter, and (7)the two transactions will have a neutral effect on earnings. These statements involve risks and uncertainties that may cause results to differ materially from those predicted or implied in this press release. For example, the company’s projections concerning the expected impact of the two transactions on earnings is based on many assumptions, including certain assumptions regarding sales, operating costs and net income. Sales, operating costs and net income can vary based on a number of factors, all of which are described in the company’s recent filings with the Securities and Exchange Commission. The sales and net income of Leche Celta could vary from the company’s assumptions for a number of additional reasons related to the fact that they operate in a foreign jurisdiction. Conducting operations in Spain involves risks and uncertainties not present in the U.S. as a result of governmental and economic conditions being generally less stable than in the United States. Whether the company’s investment in Leche Celta will be profitable will also depend on the company’s ability to adapt to operating conditions in the dairy industry in Spain, with which the company has no experience, and the company’s ability to effectively manage assets and personnel overseas. The company’s prediction that Leche Celta is well positioned to benefit from predicted consolidation in Spain is also based on a number of assumptions, including Leche Celta’s ability to attract capital and to remain competitive in its market. Moreover, there can be no assurance that the Iberian market will experience significant consolidation at all. The company’s prediction that Europe offers it the ability to grow by acquisition will depend on a number of factors, such as the availability of capital, governmental constraints and the ability to find attractive acquisition candidates, among others. The company’s belief that it may gain certain advantages with large retail customers by having operations in Europe is subject to a number of uncertainties, including the company’s ability to compete effectively and customer acceptance of the company’s products. Finally, the Ferembal transaction may take longer than expected to complete as a result of delays in obtaining antitrust approval and/or financing. All forward-looking statements in this press release speak only as of the date of this release. Suiza expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in its expectations or any changes in the events, conditions or circumstances on which any such statement is based.
Suiza Foods Corporation
Cory Olson, 214/303-3645