The Italian Job

There’s been a good story building for a couple of weeks in Europe which has some relevance to our local dairy industry.

Parmalat, the parent of the local subsidiary that owns the Pauls and Vaalia brands among others in Australia, is a brand and corporate name that has done very well to get back on its feet after the crippling fraud in 2003 that left a US$14billion hole in its balance sheet. Not many come back from that sort of mess. Through the mercy of its financiers, the company was saved, refinanced and refloated on the share market. The company has done well since it was revived in 2004.

Lactalis, the largest European dairy company based in France, which owns some of Europe’s well-known dairy brands, thinks it is so valuable it wants to take control. Lactalis recently raised its shareholding in Parmalat to just below 30 percent, and was poised to take a majority of board seats at a meeting next month.

But the Italian Government and a group of Italian banks and food companies have moved to halt the French takeover. While the Lactalis purchase was happening, the cabinet of crazy Italian PM Berlusconi was scheming to bring in a change in law to block a change in control of the iconic Italian company in the interests of its strategic value to the country.
The Italians claim that this is only what the French themselves have done. The new law would copy French rules which were drawn up in 2005 when another French dairy group Danone was being stalked by US drinks group PepsiCo. The French sought to define key businesses in certain sectors including food, defence, telecoms and energy as “strategic” to France. This is hardly the European way either, when all members are supposed to lie down and allow the free-flow of investment dollars and give up all sense of national pride.

Some might ask what is strategic about a milk and yoghurt business in an continent awash with milk is hard to see. Food culture is special to Europe however, and many of its regions have fought hard to protect iconic names against copycats. Now the ownership and domicile of a business is being given the same treatment. Maybe someone should have come up with that one in Australia a few decades ago.

The protective measure would "identify certain sectors the government believes to be strategic on which it “reserves the right to intervene” when it discovers the investors come from protected markets. By making its own law, the French left themselves wide open to the ploy.

The Italian Government has already raced to pass a regulation designed to help Parmalat delay its shareholder meeting and give the company - and its potential Italian bidders - more time to consider their options. That has been pushed out from mid-April to June.

Meanwhile claim and counterclaim have ensued just as they would in any farcical Italian opera. There have been allegations of share price manipulation. Lactalis has been quick to say that Parmalat would remain in Italy and would continue to grow in its export and domestic markets, and be an even bigger name.

Ironically a film that charted the massive fraud and crash of the company started screening in early March in Italian cinemas. With the company back in the daily business headlines, ticket sales ought to be booming.