Kerry Group becomes pure play taste and nutrition company with €500m dairy divestment

Irish food giant Kerry Group has on Tuesday said it has entered into an agreement to sell Kerry Dairy Holdings (Ireland) Limited to Kerry Co-Operative Creameries Limited for €500 million (£416m).

Kerry Co-Op is the largest shareholder in Kerry Group.

Kerry Dairy Ireland consists of dairy consumer products, with its leading range of brands across cheese, cheese snacks, dairy snacks and dairy spreads which can be found in chilled cabinets across retailers in the UK and Ireland.

It also comprises the dairy ingredients business, which is a leading provider of Irish dairy ingredients including functional dairy proteins, nutritional dairy bases and cheese systems, along with the provision of related agribusiness products and services.

As per the deal, Kerry Co-Op members will become direct owners of Kerry shares equivalent to 85 per cent of the Kerry Co-Op's current shareholding. The remaining 15 per cent of the Kerry Co-Op's shareholding in Kerry will be redeemed as part of the consideration for the disposal, following which the Kerry Co-Op will cease to be a shareholder in Kerry and Kerry’s issued share capital will reduce by approximately 2.9 million shares. The transaction will involve no public placement of Kerry Group plc shares.

Under the proposed transaction, the Kerry Co-Op will initially acquire a 70 per cent interest in Kerry Dairy Ireland, while Kerry will retain a 30 per cent interest. The companies have further agreed to certain call-put option arrangements which will transfer the remaining 30 per cent in Kerry Dairy Ireland to the Kerry Co-Op in the forthcoming years.

Kerry said the disposal represents an important step in its evolution to becoming a fully dedicated global taste and nutrition solutions company.

This follows the significant portfolio development over recent years including the build out of its proactive health, food protection and preservation, and enzymes platforms, while also divesting of the Consumer Foods Meats & Meals business and the Sweet Ingredients portfolio.

“Our strategy of continuous business development and portfolio evolution aligned to our customers has been a key underpin of Kerry’s success over the years. The proposed transaction will result in a global leader in taste & nutrition solutions and an end-to-end industry leader in dairy,” Edmond Scanlon, chief executive of Kerry Group, commented.

“Both businesses are perfectly positioned for success, thanks to the dedication and extraordinary contribution of our people over the years. On completion, Kerry will become a pure play global business to business taste & 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.”

James Tangney, chairman of Kerry Co-Op 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 circa 85 per cent 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.

“Kerry Co-Op and Kerry Group have a shared heritage that has helped create value, pioneer change and shape the dairy industry. 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”.

Kerry said the proposed transaction will have a positive impact on its overall financial metrics, with an enhanced revenue volume growth profile, combined with a step change in Kerry’s EBITDA margin profile and an improved overall sustainability profile.