Canadian Cheese and Cake Deal: Sauputo to Acquire Culinar

Quebec's Saputo offered C$283 million for cake-maker Culinar Inc., outbidding U.S. wholesale bakery, Interstate Bakeries Corp. Culinar is best known in Canada for its Jos. Louis cakes, which have been called "ultra-sweet" and legendary among Canadian children. Interstate Bakeries bid $265 million for Culinar.

Montreal, Quebec-based Saputo Group Inc. has teamed with SGF-Soquia Inc., part of Quebec government agency Societe generale de financement, to offer C$44.63 a share for Culinar. SGF, will ally with Saputo by investing a reported $100 million in the Montral-based cheese company. SGF president Claude Blanchet indicated that no counteroffer would be accepted from Interstate.

Saputo is reportedly the fifth largest cheese maker-marketer in North America with brands including Stella, Frigo and Dragone. Culinar is reportedly the largest manufacturer of snack cakes in Canada and a maker of cookies and fine breads. Its brands include Vachon, Viau-McCormicks, Normandie, Grissol and Loney's. More than 63% of Culinar's revenues come from snack cakes. The company has five plants, 2,000 employees and annual sales of roughly $315 million.

Commenting on the junkie Culinar's snack brands including Twinkies and May West, Saputo chairman Lino Saputo--a longtime snacker--told the press at a Wednesday news conference, ''I've already spent a lot of money over the years on May West's but I never thought that one day these little cakes would cost me so much.''

"We're not reinventing the wheel here,'' said Lisio, referring to other dairy companies that have confectionery units. At Saputo, Culinar's brands will be the centerpiece of a cake and confections business, as opposed to being overlooked at bakery giant Interstate.

Saputo has been acquiring U.S. cheese plants in recent years. The company employs 3,000 and operates 14 distribution centers and nine plants in Canada as well as 18 plants in the United States. Culinar has 2,000 employees at five Canadian plants and distribution facilities.

Canadian Press cited Saputo President Camillo Lisio saying it would be ''absurd'' to guarantee there would be no layoffs as a result of the takeover.

SGF-Soquia recently boosted its stake in Culinar to 83.8% with the purchase of a 48.9% block of shares from Groupe Investissement Desjardins, another government agency.

Although Saputo knows nothing about making baked confections, the deal will help it diversify from its largely commodity cheese business.

Edited by Bob Sperber