Family-run French dairy company Lactalis on Tuesday made a euro3.38 billion ($4.92 billion) offer to buy full control of Italy's Parmalat, a move the Italian government had sought to avoid to protect one of the country's corporate titans.
The unsolicited offer, at euro2.6 per share, by the maker of Galbani and President cheeses sent shares in Parmalat soaring 11 percent _ to euro2.57 _ in trading Tuesday on the Milan Stock Exchange.
In a statement, Lactalis sought to assuage concerns in Italy about the takeover, saying the merged company would be built around Parmalat and its brand name.
"We have an ambitious project for growth at Parmalat, to make a standard-bearing Italian group in consumption milk around the world, with headquarters, organization and management in Italy," said Lactalis president Emmanuel Besnier in a statement.
Lactalis said it would examine transferring its activities in the milk sector in France and Spain into Parmalat, adding that the size of the merged company could provide enhanced growth prospects in emerging markets like Brazil, China, and India.
After Lactalis moved to increase its stake in its Italian counterpart to 29 percent in recent weeks, the Italian government passed new rules to protect companies in strategic sectors from foreign takeovers. It claimed Parmalat was in the strategic sector of food production.
European Union officials have said they were watching the case to see whether EU merger rules applied.
French President Nicolas Sarkozy, in a visit to Rome on Tuesday, and Italian Prime Minister Silvio Berlusconi agreed that the two countries have much to gain from corporate tie-ups to build global industrial champions.
Sarkozy alluded to bilateral tensions over the Lactalis takeover offer.
"There's no reason to war with one another. Italy, for us, is more than Europe _ it's a brother country," he said. "So let's build a big Franco-Italian group, it will be to Italy's advantage, and France's advantage."
"We are obliged to find a solution," he added.
For his part, Berlusconi said he didn't consider the bid hostile and believed the French government was unaware of Lactalis' plans.
Lactalis said its offer is targeting 1.30 billion shares _ including the 1.23 billion shares that make up 71 percent of Parmalat's float _ plus a possible further 63.7 million shares. At euro2.6 per share, that would put Parmalat's total value at more than euro4.7 billion.
The French company said last month it had reached a euro744 million ($1 billion) deal to raise its Parmalat stake to 29 percent, becoming the largest shareholder and triggering concerns in Italy about a full takeover.
Lactalis said the combined company would have revenues of euro14 billion, making it the world leader in dairy products. The French group says it is now No. 3 in the sector, behind France's Danone and Nestle of Switzerland.
Lactalis, a family-run company based in western Laval with operations in 148 countries, reported revenues of euro9.4 billion last year. Its brands include Rondele, Galbani and President cheeses and Lactel milk.
Parmalat's Web site says the Italian company has 14,000 employees in 16 countries, and reported revenues of euro4.3 billion last year _ nearly a third of which came from Canada alone. It also has licensing deals in 10 countries.
Parmalat became a symbol of corporate greed when it collapsed under euro14 billion in debt due to fraud in 2003. It has successfully turned around by focusing on its core dairy business. The company remains a household staple across Italy as a producer of milk, yogurt and juices under the Parmalat brand.
Italy has already been on the defensive about its big corporate brands. Italian pride was wounded when French colossus LVMH Moet Hennessy last month agreed to buy Rome-based luxury jeweler Bulgari SpA.
More than two years ago, Berlusconi engineered the sale of the Italian government's stake in airline Alitalia to Italian bidders, derailing an attempt by Air France-KLM to take over Italy's flagship carrier.