Another Scherping Cheesemaking Acquisition: Damrow

The parents of two cheesemaking equipment houses, Scherping and Damrow, have agreed on a marriage. Monday, Scherping's parent, Carlisle Cos. Inc., signed a letter of intent with Damrow's parent, GEA Aktiengesellschaft, to acquire the international cheese equipment businesses of Damrow Denmark and Damrow USA.

Terms of the transaction were not disclosed, but the due diligence is expected to be complete by end-February. The acquisition is expected to provide considerable growth opportunities for Damrow as part of a focussed cheese systems group, and new business opportunities for Scherping. (Interview below).

Damrow, currently doing business in the United States as GEA subsidiary Tuchenhagen-Damrow, LLC,, sells European cheese systems, cottage cheese equipment and a full range of cheddar and mozzarella systems.

Scherping Systems, based in Winsted, MN, offers cheesemaking systems worldwide and an outlying range of turnkey systems and services for cheese and dairy plants. Parent Carlisle is based in Syracuse, NY, and has diversified industrial equipment and systems holdings in various industries.

Rationalizing the Acquired Assets
Damrow's products and services will be marketed separately from Scherping's own products, although the company said, "some product rationalizations and technology sharing will take place."

Damrow Denmark will provide full system capability to the European and South American markets. Scherping Systems in New Zealand will market Damrow products throughout Australia and New Zealand and Damrow USA will continue their sales and marketing activities directly to the North American market.

Similarly, when Carlisle acquired Innovative Engineering Ltd., a leading cheesemaking engineering/equipment supplier in New Zealand, the acquired European technology was also suitable for North America, and that the European company's portfolio would likely open up new international markets for Scherping. (See related article).

The acquired IEL as well as Damrow businesses will operate as a subsidiary of Scherping and act as a "trading arm" for a broadening line of dairy process systems. Scherping, formerly part of a division that included Walker Stainless (specialty trailers for the dairy industry), Trail King (high-payload trailers) and other subsidiaries, "has grown to the point where in May we were split off as a separate, standalone division, one of nine divisions for Carlisle," said Tim High, president of Carlisle's Scherping Systems International operation.

Damrow will be a subsidiary 100%-owned by Scherping. In the United States, Damrow will operate as a separate sales and marketing organization, and will continue selling directly to its longstanding customers. At the same time, there is likely to be some cross-pollination as Scherping and Damrow begin to share technology and also offer each others' equipment to their respective dairy processing customers. It's even possible that the Damrow label may find its way onto Scherping equipment, and vice-versa, for the sake of brand recognition, High said.

Comments on Consolidation
Asked whether consolidation in the equipment supplier base is a direct reflection of the same trend among dairy and food processors, High offered a qualified "Yes."

The number of dairy plants getting smaller, the size of plants getting bigger, and throughput at those plants is climbing. There's still a need for equipment to handle an industry that keeps turning out more and more dairy products, he said, but the opportunity to sell equipment is shrinking generally speaking, as customers get bigger and bigger, and whittle their purchasing complexity down to a few preferred suppliers.

In addition to chasing a consolidating customer base, High told us that there's another reason behind the consolidation in the dairy equipment and systems business. "It's also due, in our case, to the fact that a lot of the technologies are converging, so it's appropriate that we consolidate to take advantage of that… And so we need to offer a complete range of solutions."

High joined Scherping in July 1999, having most recently managed APV worldwide marketing. Scherping's. The expansion plans since his arrival seem to reflect that experience.

Edited by Bob Sperber