Parmalat

Parmalat S.p.A.
Company type	Subsidiary
Industry	Dairy and food products
Founded	1961; 65 years ago
Founder	Calisto Tanzi
Headquarters	Parma, Italy
Area served	Europe, Americas, Australia, China, South Africa
Products	UHT milk, yogurt, cheese, butter, ice cream, fruit juices (brands include Lactis, Santal, Malù, Kyr)
Owner	Lactalis
Number of employees	16,000
Parent	Lactalis

Parmalat S.p.A. is an Italian company specializing in dairy and food products, currently owned by the French multinational Lactalis. Established in 1961 by Calisto Tanzi, Parmalat rose to prominence as a worldwide leader in producing long-life milk through ultra-high-temperature (UHT) technology. The firm declared bankruptcy in 2003 with debts amounting to €14 billion, marking the largest insolvency case in Europe. Since 2011, Parmalat has been integrated into Lactalis, which acquired complete ownership by 2019. The company maintains operations across Europe, the Americas, Australia, China, and South Africa.

Focusing on UHT milk and related products such as yogurt, cheese, butter, and ice cream, Parmalat also offers fruit juices under various brands including Lactis, Santal, Malù, and Kyr. Its international presence comprises nearly 140 production facilities and about 16,000 employees, supported by a network of 5,000 dairy farms in Italy. Parmalat was previously traded on the Borsa Italiana.

Early history (1961–2002)

Calisto Tanzi founded a modest pasteurization facility in Parma in 1961. By the 1980s, Parmalat had transformed into a multinational enterprise with a broad product range encompassing milk, dairy goods, beverages, and bakery items. The company went public on the Milan stock exchange in 1990 and experienced continued expansion throughout the 1990s. By April 2002, Parmalat’s market capitalization had grown to €3.7 billion with over 30,000 employees operating in 30 countries. Its diversified portfolio included the travel agency ParmaTour and stakes in Odeon TV as well as football clubs like Parma F.C., Paulista Futebol Clube, and S.E. Palmeiras.

During the early 1980s, Parmalat was the primary sponsor of the Brabham Formula 1 team, prominently displaying its logo on the cars. It also maintained smaller sponsorship agreements with other Formula 1 teams until the late 1990s.

Financial fraud (2002–2005)

Beginning in 1997, Parmalat ventured into financial markets to finance its international acquisitions mainly through borrowing. By 2001, several business units were operating at a loss, prompting increased use of financial derivatives partly aimed at obscuring growing losses and debt levels. In February 2003, CFO Fausto Tonna unexpectedly announced a €300 million bond issuance that caught both the market and CEO Calisto Tanzi off guard. Tonna was compelled to resign and succeeded by Alberto Ferraris, who soon encountered restricted access to company records controlled by chief accountant Luciano Del Soldato. Ferraris suspected that the actual debt exceeded reported figures by more than double.

The planned €300 million bond issuance was abandoned in September 2003 amid scrutiny over dealings with Epicurum, a Cayman Islands-based mutual fund connected to Parmalat. Ferraris resigned shortly thereafter and was replaced by Del Soldato who also stepped down after failing to secure financing from Epicurum to cover debts and bond repayments exceeding €150 million. A Bank of America document exposed a fabricated €3.95 billion bank account attributed to Parmalat. Tanzi resigned from his roles as chairman and CEO, leaving countless investors facing irrecoverable losses.

Italian Prime Minister Silvio Berlusconi revised bankruptcy legislation to expedite creditor protections and appointed Enrico Bondi as government commissioner (commissario). Following Parmalat’s insolvency declaration at the end of 2003, Tanzi was arrested; he acknowledged an €8 billion discrepancy in accounts but denied any deliberate concealment. Subsequent audits uncovered total liabilities amounting to €14.3 billion—almost eight times higher than initially disclosed. Several subsidiaries across Brazil, Argentina, and the United States, along with Parma F.C., were rendered insolvent.

Tanzi was charged with financial fraud and money laundering. The company employed dubious accounting methods such as issuing credit-linked notes—essentially wagering on its own creditworthiness—to create fictitious assets. Tanzi admitted diverting funds into family-owned ventures like Parmatour; these enterprises suffered heavy losses while attempting competition against Berlusconi’s media empire. He received a ten-year sentence for fraud related to Parmalat’s collapse; other accused parties were either acquitted or settled outside court.

The newly appointed Parmalat management initiated lawsuits against Bank of America and audit firms Deloitte and Grant Thornton for their complicity in facilitating earlier management’s fraudulent activities. Deloitte settled for $149 million in 2007; Bank of America paid $100 million in 2009; Grant Thornton agreed to a $4.4 million settlement. Together these agreements enabled Parmalat to recover roughly $700 million from negligent banks and auditors implicated in the scandal.

Contemporary Developments

In 2005, Vicenzi took over the loss-making bakery facility in Nusco from Parmalat, a site originally launched in 1984 due to political motivations connected to Democrazia Cristiana figurehead Ciriaco De Mita.

By 2011, Parmalat's liquidity had increased to €1.5 billion. In March of that year, the French multinational Lactalis, which owns Italian labels including Galbani and Locatelli, began purchasing Parmalat shares. Lactalis swiftly acquired close to 30% on the stock market and finalized a €2.5 billion acquisition in July 2011, securing an 80% stake at €2.6 per share.

Parmalat posted revenues of €6.42 billion and an EBITDA of €444.5 million in 2015. On 27 December 2016, Lactalis, possessing 87.74% of Parmalat’s shares, launched delisting procedures with a tender offer starting at €2.8 per share to buy out remaining shareholders; this was subsequently increased to €3 per share. However, resistance from hedge fund Amber and other investors prevented the delisting.

By December 2018, Lactalis had boosted its ownership to nearly 95% and prepared a renewed takeover bid aimed at delisting. It purchased an additional 7% from dissenting shareholders and confirmed plans to delist by March 2019.

After the acquisition, Lactalis centralized its strategic management in France and progressively reduced operations within Italy. By 2019, the future status of Parmalat’s historic manufacturing plant in Rome remained uncertain.

Countries with Direct Operations

Australia
Bolivia
Botswana
Canada
Colombia
Cuba
Ecuador
Eswatini
Hong Kong
Italy
Mexico
Mozambique
New Zealand
Paraguay
Peru
Portugal
Romania
Russia
South Africa
Venezuela
Zambia

Countries Served via Licensing Agreements

Argentina
Brazil
Chile
China
Costa Rica
Dominican Republic
El Salvador
Guatemala
Haiti
Honduras
Hungary
Mexico
Nicaragua
Spain
United States
Uruguay

External links

BBC: "Parmalat in Bankruptcy Protection" 24 December 2003
Parmalat dream goes sour; The Observer; 4 January 2004
There is Something about Parmalat (On Directors and Gatekeepers); Simone di Castri and Francesco Benedetto on ssrn.com.