Split milk

28 October 2005

It makes sense to split the dairy group s operating activities from the lawsuits it has filed against its banks. But there are conflicts because these banks are also big shareholders. These need to be managed.

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Parmalat's stock has fallen by over 20% since the dairy group relisted in October, two years after its bankruptcy at the end of 2003.

Granarolo, another Italian milk group, is believed to be studying plans to break Parmalat up. It would buy the dairy arm and spin off the group's lawsuits into a separate vehicle, according to reports. Banca Intesa, which is both a shareholder in Parmalat and one of the banks that is being sued by the group, is reportedly advising Granarolo and owns 20% of it.

A group of hedge fund investors coordinated by Lehman Brothers is compiling a slate of directors to put to Parmalat's shareholders' meeting in November. The group will back the reelection of Enrico Bondi, Parmalat's administrator. It isn't clear whether other lists will be presented.

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