is the world’s biggest dairy company about to be born?

The dairy world is holding its breath as the French privately owned giant Lactalis, which already owns 29% worth of Parmalat stakes, has furthered its goals to a full take over bid of the Italian dairy company. If the deal is secured it will reportedly create the world’s biggest dairy company. Leaving the politics and the financials to the experts, I wanted to focus on what the business implications would be for the newly formed group if the acquisition goes ahead. Strategically Lactalis and Parmalat have leading positions in complementary product categories and geographical areas. If all under the same roof, the synergies would be unparalleled. The company’s market share, global presence, economy of scale, but also operations optimization would increase dramatically. If as Euromonitor International Ltd reports dairy sales are forecast to increase 13 percent from 2010 through 2015, investing in this acquisition, especially since its at the cheapest valuation for a milk takeover, is a safe bet. Lactalis who acquired the Italian cheese company Galbani in 2006, has since grown the brand outside of Italy to a 17% sales rise overseas last year. With Parmalat, a Lactalis spokesman commented, a stronger Italian business would be created – filling in for Parmalat’s current management – and each company could benefit from the overseas presence of each other. He cited the examples of Parmalat’s presence in Canada and Australia. Lactalis has no presence in Canada and only a fledgling business in Australia. Similarly, Parmalat’s businesses in South Africa and Venezuela could help the French group expand in emerging markets. National sentiments aside, from a business perspective this deal is potentially beneficial for both parties… the rest is all politics.