Kraft to sell century-old Canadian cheese business to Parmalat in $1.62 billion deal

Reuters

The Canadian business includes 3,000 workers and 16 dairy processing plants

Kraft Heinz Co has agreed to sell its Canadian natural cheese business to Parmalat SpA in a $1.62 billion deal that will help Kraft trim its debt and extend the North American footprint of Parmalat owner Lactalis.

The deal comes a month after the new United States-Mexico-Canada Agreement (USMCA) was signed, under which Canada partially opened its protected domestic market to the United States.

The cheese business being sold by Kraft, which includes brands like Cracker Barrel, P’tit Quebec and aMOOza, generated about $560 million in net sales in 2017, Kraft and Parmalat said in statements on Tuesday.

The transaction followed a competitive bidding process, Parmalat said.

Under the deal, expected to close in the first half of 2019, Kraft will sell its production facility in Ingleside, Ontario and transfer 400 employees to Parmalat.

The U.S. food group will continue to own and market other cheese products, including Philadelphia, Cheez Whiz and Kraft Singles, which are processed in Quebec.

Kraft, which like other consumer goods firms has been struggling with rising costs for raw materials and transportation, expects to use proceeds from the deal to pay down debt, which amounted to nearly $31 billion as of Sept. 29.

RBC Capital Markets served as exclusive financial adviser to Kraft Heinz Canada, while Fasken Martineau DuMoulin LLP served as legal advisers.

Parmalat said the activity will reinforce its century-old Canadian business that already comprises 3,000 employees and 16 dairy processing plants, helping to secure jobs and farm revenue.