Agropur, whose brands include Iogo yogurt and Oka cheese, and larger rival Saputo Inc (>> Saputo Inc.) have already built U.S. businesses through acquisitions, looking for profits outside Canada's managed-supply system.
The Trans-Pacific Partnership trade deal, signed this month, and Canada-European Union trade agreement provided extra incentive for dairies to seek growth outside Canada, which controls supplies and prices while slapping steep tariffs on most imports.
Dairies from Europe, New Zealand, the United States and other countries will gain access to 5.5 percent more of the Canadian market once the deals are ratified and fully take effect.
For Quebec-based Agropur, which earned 44 percent of its C$5.9 billion in revenue last year from the United States, the fragmented U.S. dairy industry looks inviting, Agropur Chief Executive Robert Coallier said in an interview.
"Our focus should be to participate in the American consolidation of the dairy industry," Coallier said, adding that buying opportunities are "substantial."
Family-owned U.S. dairies are of particular interest because they may mesh well with Agropur's culture, he said.
The United States is the second-largest consumer of cheese after the European Union, and third-biggest fluid milk consumer, according to U.S. Department of Agriculture.
Coallier would not say how much Agropur could pay for an acquisition, but said it has the means to ink a deal similar to its 2014 purchase of Davisco, a private U.S. dairy that had annual revenue of more than $1 billion. That deal's purchase price was never disclosed.
Agropur, which is owned by some 3,400 dairy farmers, raised C$300 million in December from its institutional investors by issuing preferred shares.
Its eyeing of the U.S. market comes against the backdrop of slumping global dairy prices, which hit record highs in 2013 but recently plummeted due to slowing economic growth in China and an oversupply of milk products.
Agropur, however, is not likely to be alone in shopping the U.S. milk aisle.
Saputo's 2013 acquisition of Morningstar, a division of Dean Foods Co (>> Dean Foods Co), gave it a significant U.S. presence. The company, also based in Quebec, owns additional operations in Australia and Argentina.
Big acquisition opportunities exist, but Saputo plans to be patient, Chief Executive Lino Saputo Jr. said in a Feb. 4 call with analysts. "I have great confidence that we will materialize acquisitions as we move forward," he said.
(Editing by Paul Simao)
By Rod Nickel
