Friboi expands its reach with the acquisition of Itambé.

Milk Point Vigor, a dairy company owned by the J&F group (owner of the JBS/Friboi meatpacking company), announced the purchase of 50% of the Minas Gerais-based Itambé dairy company. The deal will be made through a capital increase, with an investment of R$ 410 million from Vigor. The funds will be used to finance Itambé's growth and address its debt, estimated at around R$ 500 million. The two companies will form a dairy company with annual revenue exceeding R$ 3 billion. Itambé already has a dairy plant in Goiânia.

Itambé is the fourth largest dairy manufacturer in Brazil, behind Nestlé, LBR, and BRF. The company processes 3 million tons of milk per year in five factories – four in Minas Gerais and one in Goiás. The brand belongs to the Central Cooperative of Rural Producers of Minas Gerais (CCPR), which has been in the dairy market since 1944 and still retains 50% of the company's capital.

Until November of last year, Itambé operated as a cooperative. In December, it transformed into a publicly traded company (S/A) and is now raising capital to bring Vigor on board as a partner. The restructuring included the division of the group's assets, which also includes the manufacture of animal feed and the ownership of agricultural warehouses. Vigor became a shareholder only in Itambé's dairy business – a unit that had revenues of R$ 1,8 billion in 2012. The animal feed and warehouses remain the sole property of CCPR.

Vigor could give Itambé access to a larger volume of milk, which could lead to increased production for the company. "The partnership between the two groups will enhance Itambé's operations, allowing it to continue its growth trajectory with an appropriate capital structure, independent operational and administrative processes, and fully professional management," Vigor stated in a press release.

According to the company, its operation is complementary to that of Itambé. The Minas Gerais-based brand is strong in segments such as long-life milk, powdered milk, condensed milk, and cream cheese. Meanwhile, Vigor's strength lies in yogurts and cheeses. "Itambé will contribute to better complementarity with Vigor's products," said the company, which totaled R$ 1,3 billion in revenue in 2011.

The acquisition of a stake in Itambé brings a brand with tradition to Vigor's portfolio, says food and beverage expert Adalberto Viviani, from the consulting firm Concept. According to him, the Vigor brand has been making efforts to modernize, such as the launch of Greek yogurt, while Itambé is a brand that wins over consumers due to its market tradition. "The deal adds to Vigor a brand that speaks to a different audience," said Viviani.

The companies did not disclose the extent of the synergy resulting from the merger of operations. According to Viviani, the company can achieve operational gains by integrating its sales and product distribution teams. "Freight costs are very high for dairy products. The product is perishable, and the ability to frequently replenish the point of sale is a significant differentiator in this market," she says.