Reuters: Bankruptcy News: Ten years on, reborn Parmalat is still fighting legal battles

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Ten years on, reborn Parmalat is still fighting legal battles Jun 13th 2013, 15:37 Thu Jun 13, 2013 11:37am EDT * Parmalat being probed for purchase of Lactalis' unit LAG * Company faces financial hit for past dairy deal * Profitability has improved, but workers fear job cuts By Lisa Jucca and Valentina Accardo PARMA, Italy, June 13 (Reuters) - Ten years after its spectacular collapse in an accounting scandal, reborn Italian dairy firm Parmalat is still struggling to free itself from legal disputes that are clouding both its prospects and those of its new French owner. In March, a local court put Parmalat under the oversight of a special commissioner as part of an investigation into its purchase of a business from its majority owner Lactalis - a deal which helped Lactalis to cut its debt, but which some minority investors say was overpriced and makes little strategic sense. Parmalat may also have to fork out millions of euros to retain ownership of a Rome-based dairy firm it acquired in 1998, after a Roman court declared the purchase invalid. That ruling forced Parmalat to take hefty provisions, slash its dividend and push back the approval of its 2012 accounts to Friday - when minority investors are expected to vent their displeasure at a shareholder meeting. "The company is paralysed from this whole legal situation. We work for the company during the daylight and for the court at night," an insider told Reuters on condition of anonymity. Parmalat, known for its long-life milk and with operations spanning from Canada to Australia, imploded in December 2003 in a multi-billion dollar accounting scandal. In the years that followed, it was rebuilt by former boss Enrico Biondi, and two years ago, Lactalis bought it in a 3.8 billion euro ($5.1 billion) deal that created the world's biggest dairy group and moved the centre of power at Parmalat away from its sleepy but wealthy provincial home of Collecchio. Since Lactalis acquired its 83 percent stake, Parmalat's profitability has risen, helped by tight cost control and the closure of three Italian plants. But the French group found itself in a legal vipers' nest after it emerged that Parmalat used more than half of its 1.5 billion euros of liquidity to buy LAG, a U.S. unit of Lactalis. LAG helped to lift Parmalat's first-quarter earnings by 25 percent thanks to its higher-value cheese products, offering better returns than the 1-1.5 percent from holding cash. However, some minority investors are up in arms, leading a Parma court to launch an investigation and appoint economics professor Angelo Manaresi to oversee the business. Under pressure from the probe, the Parmalat board has cut the purchase price of the LAG deal to $768 million from the initial $912 million. Manaresi, who is due to complete a report at the weekend assessing whether Parmalat has benefited from the LAG deal, told Reuters that was good news. "The price discount, which is close to the maximum amount possible and the result of a negotiation, is to be viewed more positively than negatively," he said. But if the judge were to take a negative view of the deal, lawyers believe it could lead to the removal of the entire Parmalat board. WORKERS' CONCERNS Even though only around 100 jobs have been lost in Italy since Lactalis took over, workers and local politicians are taking an increasingly negative view of the new ownership. Workers acknowledge the situation at Parmalat is rosier than at big Italian companies like appliance maker Indesit, which is cutting 1,400 jobs, a third of its Italian workforce, in effort to push through a turnaround plan in a recession. But they resent the fact that a promise to invest in Parmalat and make it the centre of European milk production for Lactalis has gone out of the window due to the economic crisis. "Unions had initially taken a positive view on the acquisition since there was no credible alternative," said local union leader Luca Ferrari. "But we have since changed our view since the company did not stick to its initial commitments." Locals also fear that a new business plan in the autumn will lead to the loss of around 100 white-collar jobs as the company continues to shift its decision making to France, concerns shared by politicians including Parma mayor Federico Pizzarroti. "To see Parmalat achieving results from an industrial point of view is obviously positive," said Giorgio Pagliari, a centre-left senator who has played a pivotal role in local politics. "But questions remain on what will be the destiny of many industrial sites in and around Parma." ($1 = 0.7498 euros) (Editing by Mark Potter) Link this Share this Digg this Email Reprints

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