Saputo to sell U.K. operations to Lactalis for around $1.86 billion

Saputo Inc. says it has agreed to sell its dairy division in the United Kingdom to Lactalis for roughly $1.86 billion.

The Montreal-based company said the deal includes five manufacturing facilities, along with its local brands such as Cathedral City, Wensleydale, Davidstow, Clover and Country Life.

Saputo said its U.K. operations have generated around $1.2 billion in revenue over the past four quarters, which represents about seven per cent of its total revenue.

"This transaction reinforces our strategic focus and enhances our financial flexibility as we continue to create long-term shareholder value through disciplined capital allocation," Saputo president and chief executive Carl Colizza said in a news release Friday (Aug. 14).

READ: Lactalis Canada signs deal to buy Agropur's fine cheese business

The company expects the sale to close by the end of the first quarter of 2027 and says it is subject to certain conditions, including regulatory approvals.

RBC analyst Irene Nattel said in a note to investors Friday that she views the move as positive. She said that while the U.K. segment "enjoys a position of branded product leadership, it has also struggled with reconstituting profitability."    

"Today's announcement crystallizes value for this segment at a level slightly above (Saputo's) entry value in 2019 and at a multiple above (Saputo's) current valuation," she said.   

Saputo announced a deal earlier this year to sell an 80 per cent stake in its dairy division in Argentina to Gloria Foods, the dairy and food holding company of Grupo Gloria.

Last week, Saputo reported net earnings of $183 million during its first quarter, up from $157 million last year. 

That amounted to diluted net earnings per share of 45 cents, compared with 38 cents during the prior-year quarter.   

Saputo's revenue came in at $4.42 billion for the period ending June 30, rising year-over-year from $4.36 billion.