UPDATE: Parmalat Board Rejects Lactalis EUR2.60/Share Bid

Parmalat SpA's (PLT.MI) board said Tuesday it considered the price of EUR2.60 that France's Groupe Lactalis SA is offering for every share it does not already own in the Italian dairy group as inadequate.

The board, which met in Milan to review the takeover bid for the remaining 71% of Parmalat, said its members voted unanimously against it.

"The Board of Directors ...concluded that the consideration offered does not reflect the value of Parmalat in the context of a change of control transaction," it said in a statement, confirming earlier comments made by two people familiar with the situation.

The board said it had made its decision after reviewing a fairness opinion on the bid provided by Goldman Sachs (GS), the U.S. bank.

The board's decision was widely expected following a series of local news reports discussing the Parmalat chief executive's opposition to the idea of selling out to Lactalis. Additionally, the offer price is lower than the EUR2.80 a share paid by Lactalis for a 15.3% stake jointly-owned by three funds when the French firm was building its stake to 29% in March.

Analysts expect shareholders to ignore the board's decision and sell because an alternative has failed to materialize.

With the help of the Italian government, a group of bankers and industrialists had defended Parmalat but failed to recruit sufficient investors to build a big enough stake to prevent Lactalis from taking control.

After obtaining regulatory approval for its offer last Friday, Lactalis plans to run it from May 23 to July 8.

It is aiming for at least a 55% stake.

Parmalat's stock ended at EUR2.61 in Milan.

Lactalis was not immediately available for comment.

-By Gilles Castonguay, Dow Jones Newswires; +39 02 5821-9908; gilles.castonguay@dowjones.com

(Alberto Chimenti of MF-Dow Jones contributed to this article.)

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