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Exclusive: Parmalat should cut LAG price by $151 million, report to court says

By Valentina Accardo

PARMA, Italy (Reuters) - A court-appointed commissioner has recommended Italian dairy group Parmalat cut the price it paid to its parent company Lactalis to acquire its North American cheesemaking division by $151 million, a move that will please minority shareholders.

Parmalat , which is 83-percent owned by French dairy firm Lactalis, initially agreed last year to buy Lactalis American Group (LAG) from the parent for $904 million, a move that angered minority shareholders who accused management of acting in the parent company's interest by overpaying.

Last month, Parmalat cut the price of the deal to $774 million to take into account lower 2012 earnings. However, minority shareholders want the price cut further. The acquisition has been the focus of a legal inquiry.

According to a confidential court report seen by Reuters, commissioner Angelo Manaresi recommended cutting the price further to $623.15, based on a multiple of 7.65 times its EBITDA (earnings before interest, tax, depreciation and amortization).

His report has been handed over to a Parma-based judge that is to rule on the legality of the LAG acquisition.

The acquisition has already taken place, so cutting the price would mean Lactalis would have to refund money to Parmalat.

Parmalat, known for its long-life milk and with operations spanning from Canada to Australia, imploded in December 2003 in a multi-billion dollar accounting scandal.

In the years that followed, it was rebuilt by former boss Enrico Biondi. Two years ago, Lactalis bought it in a 3.8 billion euro ($5.1 billion) deal that created the world's biggest dairy group and moved the center of power at Parmalat away from its sleepy but wealthy provincial home of Collecchio.

Since Lactalis acquired its 83 percent stake, Parmalat's profitability has risen, helped by tight cost control and the closure of three Italian plants.

The Lactalis-controlled Parmalat board has however faced criticism for turning more than half of Parmalat's 1.5 billion euros of liquidity over to the parent to buy LAG, which markets President brie and Sorrento mozzarella in the United States.

Italian investment bank Mediobanca , which gave a fairness opinion of the LAG purchase price, declined to comment. Parmalat was not immediately able to comment.

LAG helped to lift Parmalat's first-quarter earnings by 25 percent thanks to its higher-value cheese products, offering better returns than the 1.0-1.5 percent from holding cash.

(Reporting by Valentina Accardo; Writing by Lisa Jucca; Editing by Peter Graff)

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