Saputo to buy Neilson Dairy

Quebec dairy giant Saputo has announced a cash deal to buy Neilson Dairy, Weston Foods’ dairy division, for $465 million.

Neilson makes and markets fluid milk and dairy beverages, cream, non-dairy creamers, butter, yogurt, juices and drinks under the Neilson brand and others, primarily for the Ontario market.

The deal, to be financed through Saputo’s available lines of credit and other committed financing, is expected to close by about Nov. 24, pending the usual approvals, including that of the federal Competition Bureau, Saputo said in a release Wednesday.

Neilson Dairy runs two dairy facilities in Ontario: one at the former Clark Dairy site in Ottawa, supplying eastern Ontario and western Quebec, and its “superdairy” at Halton Hills, supplying the Toronto area and the rest of Ontario.

Combined, the two operations employ about 390 people and generate about $600 million in annual sales, with earnings before interest, income taxes, depreciation and amortization (EBITDA) of about $50 million, Saputo said.

The deal will allow Saputo’s Canadian dairy division to boost its presence in the Ontario fluid milk and cream market, the buyer said in its release.

“Neilson Dairy primarily operates within the retail market segment and, as part of the transaction, Saputo will inherit Neilson Dairy’s long term relationships with its customers,” Saputo said.

Weston, in a separate release Wednesday, described the deal as “an excellent transaction for Weston and its shareholders (that) allows Neilson Dairy to continue to grow with Saputo, Canada’s largest dairy processor.”

Saputo’s recent expansions have included Wisconsin’s Alto Dairy Co-operative, bought earlier this year for US$160 million, and a California industrial cheese operation Saputo bought from Land O’Lakes in early 2007.

Neilson Dairy dates back to the William Neilson Co. in Toronto in 1893, which expanded into a major ice cream maker and became one of the world’s biggest manufacturers of chocolates and chocolate bars in the following 50 years. George Weston bought the Neilson business in 1947 after the death of William Neilson’s son Morden, who had run the family firm since 1915.

Weston soon consolidated all its other dairy operations under the Neilson brand, adding fluid milk to the Neilson operations. Neilson bought Cadbury’s Canadian candy business in 1987 and sold all its candy business, by then called Neilson Cadbury and the largest such business in Canada, in 1996. Neilson sold its ice cream business to Ault Foods in 1990.