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Dairy Crest Linked to French Stalker

Posted on: Wednesday, 21 December 2005, 18:00 CST

By Tessa Thorniley, Daily Mail, London

Dec. 21--Dairy Crest's denial of bid talks was in the spotlight after secret documents reveal it allowed French stalker, Lactalis, access to its books two months ago.

A carefully-worded statement from Dairy Crest, owner of Cathedral City cheese and Frijj milk, said it has not received a formal approach or indicative offer and is not in discussions with Lactalis or any other party.

However, papers seen by the Mail indicate there have been numerous meetings between the rival dairy firms and that Lactalis was given access to sensitive financial information.

Code-named "Project Marguerite" by the French raiders, the mooted deal consisted of a 630p-pershare, all cash offer. This valued Dairy Crest at £786m. Lactalis was being advised by Deutsche Bank with Rothschild acting for its UK counterpart.

Dairy Crest revealed to Lactalis that it will spend £27m this year and £34.6m next year to market brands such as Clover, St Ivel Advance and Cathedral City, the documents show. The higher spend comes as Britain's second largest milk supplier bolsters its cheese and spreads businesses in a market dominated by wafer-thin margins.

Analysts said it was unclear how the secretive, private French company -- owned by the founding Besnier family -- could raise the funds to clinch the deal.

They also questioned the strategic sense of the tie-up.

One said: "Why would Lactalis buy the Glasgowbased McLelland cheese business last year only to try and buy Dairy Crest a year later, immediately triggering a Competition Commission inquiry?" However, a note from Panmure Gordon said the deal would make financial sense for Lactalis, best known for its President brand.

Shares in Dairy Crest reached a three-year high of 534p at the start of the week, but slipped back 5p to 516 1/2p.

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Copyright (c) 2005, Daily Mail, London

Distributed by Knight Ridder/Tribune Business News.

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DCG,

Source: Daily Mail

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