Kraft Heinz Co is to sell its Canadian natural cheese business to Italian dairy group Parmalat SpA in a deal valued at C$1.62 billion as the US food giant looks to pay down its debt load.
The deal comes a month after the new United States-Mexico-Canada Agreement (USMCA) was signed, under which Canada opened up its protected domestic market to the United States. It also promised to fully compensate farmers for any losses they might incur.
Canada manages dairy supplies by setting production quotas, prices and curtailing imports. Other Canadian dairy companies have sought faster growth elsewhere, such as Saputo Inc , which expanded into the United States and Australia.
The natural cheese business being sold, which includes brands like Cracker Barrel, P'tit Quebec and aMOOza, contributed about C$560 million to Kraft's net sales in 2017.
Paying Down Debt
Kraft expects to use proceeds from the deal to pay down debt, which amounted to nearly $31 billion as of Sept. 29.
Consumer goods companies such as Kraft have struggled in recent months to cope with skyrocketing costs for raw materials and transportation.
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.
Kraft said it will continue to own and market its other cheese products, including Philadelphia, Cheez Whiz and Kraft Singles, which are processed in Quebec.
RBC Capital Markets served as exclusive financial adviser to Kraft Heinz Canada, while Fasken Martineau DuMoulin LLP served as legal advisers.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
