NEW YORK, March 16 (Reuters) - A fire sale of global dairy group Parmalat's major assets isn't about to happen, people close to the company said on Tuesday, even though Parmalat said it would shed dozens of brands in a sweeping business overhaul.
Its Archway cookie operations in the United States, for instance, aren't on the block - for now, the sources said.
Parmalat, known for its boxed milk, canceled efforts to sell its Archway division after filing for bankruptcy protection last year. The company, based in Parma, Italy, revealed in December it could not account for billions of dollars in cash. On Tuesday, it outlined a rescue plan that could include selling non-core assets, such as the Italian soccer club Parma, and a debt-for-equity swap.
Parmalat said it would concentrate on 30 brands, mainly milk, juices and related products - down from 120 brands today. "Anything they put on the market will fetch a lower price today than after the whole business is stabilized," said one person with knowledge of the company's restructuring plans. "I don't think there is a lot for sale." The company's efforts to sell assets could be complicated by bankruptcy and labor laws in various jurisdictions in Parmalat's far-flung empire. It has sought bankruptcy protection in the United States, the Netherlands, Brazil and elsewhere.
U.S. DAIRY ON THE BLOCK
Among the assets for sale are the U.S. dairy operations, which the company put into Chapter 11 bankruptcy protection on Feb. 24 and said it would sell to pay creditors. The company also put its Brazilian operations into bankruptcy last month and would likely entertain offers for that business.
But the process of divestment as outlined by Parmalat on Tuesday involves as much pulling the plug on unprofitable brands and businesses as selling them, these sources said.
"A lot of the brands in Europe, they will simply cut the lines on," said one source, who asked not to be named. "And the company won't fund insolvent subsidiaries."
"Their first job is to maximize the value of the company," said Charles Masson, partner in New York restructuring advisor Masson & Co. "Things that are ancillary to that, or distract or contradict from that, they ought to get rid of. But if you don't have to do a fire sale, why would you?"
The winnowing-down process is part of an overall restructuring plan for the next several years aimed at generating operating margins of about 10 percent on sales, which would be comparable to those of international competitors, Parmalat said.
The company has appointed investment bank Lazard to help it sell assets and restructure global debt, and crisis management firm AlixPartners to help stabilize the business in the key U.S. market.