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Business

February 4, 2017

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World Bank to provide $145mln in financing to Engro Foods’ buyer

World Bank to provide $145mln in financing to Engro Foods’ buyer

LAHORE: The International Finance Corporation (IFC), a member of the World Bank Group, will provide a $145 million worth of financing to FrieslandCampina, one of the largest dairy producers in the world, to spur the development of Pakistan's dairy sector, an official said on Friday.

The financing will help the Dutch dairy company acquire 51 percent of Engro Foods, Pakistan’s leading dairy processor. 

The financing package includes equity investments of $45 million and a senior loan of $100 million. 

In July last year, Engro Corporation Limited agreed to sell a controlling 51 percent stake in its foods subsidiary, Engro Foods, to a Dutch dairy cooperative in a deal valuing around $448 million.

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden, the Dutch development bank, will also provide up to $45 million to support the acquisition.

“Pakistan is a key emerging market and is backed by one of the world’s largest and fastest-growing middle classes,” said Roelof Joosten, chief executive officer at Royal FrieslandCampina. “Together with Engro Foods, FrieslandCampina can contribute to food security, the more sustainable production of dairy, and raising living standards for Pakistani dairy farmers. I am convinced that this partnership will create long-term value for everyone.”

FrieslandCampina will share its global experience and international best practices with the small-hold farmers who supply milk to Engro Foods and most dairy processors in Pakistan. 

More than 200,000 farmers and 270,000 distributors are expected to benefit from the company's acquisition of Engro Foods, which will also create more than 1,000 new jobs in the dairy supply chain.

Engro Foods is part of Engro Corporation, one of the largest industrial conglomerates in Pakistan. It has a diversified business portfolio that includes operations in fertilisers, foods, petrochemicals and energy. 

Since 1991, IFC supported the group’s operations with around $200 million in investments.

“The success of Engro Foods demonstrates the potential of private businesses to transform industries,” said Mouayed Makhlouf, IFC Regional Director for the Middle East and North Africa. “At the same time, this financing package should underline for foreign investors the potential of Pakistan's private sector, which is growing quickly and is full of opportunities.”

Pakistan is the third-largest milk consumer in the world and its dairy industry produces 38 billion liters of milk annually. The acquisition will help improve food safety standards as supply chains improve productivity.  The financing package is part of IFC’s broader strategy in Pakistan to support local producers, drive inclusive growth, and create jobs. 

In the fiscal year 2016, IFC committed $117 million in long-term financing to Pakistan. 

FrieslandCampina has offices in 32 countries and employs over 22,000 people. FrieslandCampina's products find their ways to over a hundred countries. The company's central office is based in Amersfoort.

Engro Foods Ltd. was launched in 2004 as a fully-owned subsidiary of Engro Corporation Limited, one of Pakistan’s largest conglomerates. Engro Foods manufactures, processes, and sells dairy products, juices, ice cream, and frozen desserts. The company’s core business is dairy. Procuring milk is one of its most important activities.   

Through Engro Foods’ milk collection network, being present right at their doorstep, coupled with on-farm training and technical guidance on farming and milk production, Engro Foods is helping improve the livelihoods of hundreds of thousands of people. More recently, the company has also entered into the international market. Its first venture has been to acquire a halal foods business, Al Safa Halal, Inc. (Al- Safa) in North America.

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