Kerry Group has agreed to sell its consumer dairy and ingredients businesses for a total consideration of €500m ($531m) to Kerry Co-Operative Creameries.
The purchase deal for Kerry Dairy Ireland, in the making for around three years before talks were suspended in 2021, entails two parts to be completed and settled in stages.
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Part one, or the so-called phase-one transaction, will see the Co-op acquire 70% of Kerry Dairy Ireland for €350m, with Kerry Group initially retaining the remainder.
Part two will be settled through a call-option process, which can be exercised by the Co-op anytime up to July 2035 for a cash consideration of €150m for the other 30% interest.
Kerry Group said in a filing today (12 November) with the London Stock Exchange that the “proposed transaction” marks its “evolution to becoming a fully dedicated global taste and nutrition solutions company”.
The group had previously sold its consumer-facing meats and meals business, which included the Richmond sausages and Fridge Raiders brands, to Pilgrim’s Pride in 2021.
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By GlobalDataKerry Co-Operative Creameries will now be buying up assets still held within Kerry Group’s dairy consumer products division, which includes cheeses, spreads and dairy snacks, as well as dairy-free alternatives and hybrid products like the Smug blended oats range launched earlier this year.
Brands within the transaction include Cheestrings, Dairygold, Golden Cow, Kerrymaid and Low Low, mainly sold in the UK and Ireland.
Meanwhile, Kerry Group said the dairy ingredients assets include “functional dairy proteins, nutritional dairy bases and cheese systems, along with the provision of agri-business products and services in the south-west of Ireland”.
Just Food has asked Kerry Group to explain the differentiation between the dairy ingredients business being sold and the taste and nutrition solutions part that the group will now focus on.
Phase one of the transaction is expected to be completed by the end of January next year, and will involve the transfer of seven manufacturing facilities and more than 1,500 employees to the Co-op.
Kerry Group’s shareholders will vote on approving the transaction at a meeting on 19 December.
Edmond Scanlon, the CEO of Kerry Group, said: “On completion, Kerry will become a pure play global business-to-business taste and nutrition company, with sustainable nutrition at its core, while also supporting our financial objectives of continued market outperformance, strong margin progression and delivering greater returns for our shareholders.”
Kerry Dairy Ireland had gross assets of €562m at the end of last year, when revenue and profits both fell.
Revenue declined 16.8% to €1.28bn, while EDITDA dropped 24.5% to €53.4m. Profit before tax was €32m, Kerry Group said today, although a comparative figure was not provided for Kerry Dairy Ireland by the group in its 2023 annual report.
Kerry Group and Kerry Co-Operative Creameries currently have a partnership dating back to 1974, with the latter holding around 11% of the stock holding in the former amounting to around 19 million shares.
The transaction will involve a share swap or exchange, explained by Kerry Group.
“A share-for-share exchange, whereby Kerry will acquire approximately 85% of the shares in the Co-op that are held by its members, in exchange for issuing an amount of Kerry shares directly to the members of the Co-op, equal in value to approximately 85% of the Kerry shares currently held by the Co-op.
“The remaining 15% of the Co-op’s shareholding in Kerry will be redeemed as part of the consideration for the disposal, following which the Co-op will cease to be a shareholder in Kerry.”
James Tangney, the chairman of Kerry Co-Operative Creameries, commented: “We are very pleased to have reached an agreement that will ultimately deliver full ownership of one of the leading dairy businesses in the country, while also, in effect, releasing c85% of Kerry Co-op’s Kerry Group shares into the hands of our members to be retained or sold by each of them at a time of their choosing.
“As direct shareholders in the plc, members will continue to gain from the group’s progress and, in tandem, the Co-op will focus on ensuring Kerry Dairy Ireland becomes a platform for future growth.”
