Sobeys to divest western Canada dairy facilities in $356m deal

Canadian food retailer Sobeys will sell its four dairy manufacturing facilities in western Canada as part of a $356m deal signed with dairy co-operative Agropur.

Located in Edmonton, Winnipeg and Burnaby, the facilities have 281 staff and process more than 160 million litres of milk per year.

Under the agreement, Agropur will license the Lucerne trademarks from Sobeys, as well as supply milk, yogurt and ice cream to Sobeys, Safeway and IGA stores in the west through long-term supply arrangements.

Sobeys president and CEO Marc Poulin said the agreement maximises the value for the assets while securing long-term supply agreements that create synergies for the company’s entire Canadian business.

"It also ensures that these facilities will continue to produce the very popular Lucerne dairy brand, which will not only remain available in our Safeway banner stores, but will be expanded to our network of Sobeys and IGA stores throughout the west," added Poulin.

The purchase of the facilities is subject to approvals from regulatory bodies, including the Competition Bureau.

Agropur president Serge Riendeau said: "This transaction will confirm our leadership position in the Canadian milk industry, for the greater benefit of all of our members-producers and owners."

Proceeds from the latest deal, which Sobeys expects to be neutral to slightly accretive on a net earnings basis, will be used to repay debts.

The company acquired the dairy manufacturing operations as part of its takeover of Canada Safeway’s stores and operations last year.