Kerry Group sells Irish consumer and ingredients arm
Kerry Group has entered into an agreement with Kerry Co-Operative Creameries to sell Kerry Dairy Holdings (Ireland) Limited to the co-op for a total expected consideration of €500 million. Kerry Dairy Ireland is fully owned by Kerry.
Kerry Dairy Ireland consists of dairy consumer products, with its 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 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.
Co-operative members will become direct owners of Kerry shares equivalent to 85% of the co-op’s current shareholding. The remaining 15% of the 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 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.
This will result in two businesses, Kerry Group and Kerry Dairy Ireland, each better positioned to focus on their respective strategies and capital allocation priorities, the companies say.
The transaction represents an important step in Kerry’s evolution to becoming a fully dedicated global taste and nutrition solutions company, it says. 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 its consumer foods meats and meals business and the sweet ingredients portfolio. The transaction will result in greater portfolio clarity, a more simplified business structure, and increased capital deployment focus across Kerry’s core taste and nutrition business, while further strengthening Kerry’s ability to execute against its strategic priorities, Kerry says.
The move builds on the partnership between Kerry and the co-op, which first began in 1974 and will evolve to a new ownership model for Kerry Dairy Ireland. The structure with Kerry continuing to have 30% ownership into the future will support continuity and alignment with Kerry Dairy Ireland, the co-op’s members and other stakeholders.
The proposed transaction also brings consumer products and value-add dairy ingredient activities closer to the dairy farmers and broader dairy ecosystem, thereby creating a vertically integrated Irish dairy player of scale, which will be one of the largest dairy processors in the country. In order to ensure continuity in Kerry Dairy Ireland’s operations and facilitate an orderly ownership transition, Kerry, the co-op and Kerry Dairy Ireland have agreed that certain transitional services will be provided by Kerry to Kerry Dairy Ireland comprising IT services, group shared services, purchasing services and corporate services. Certain IP licensing arrangements will also be entered into such that the Kerry Dairy Ireland Business can continue to avail of certain IP it requires, which is owned by Kerry.
The board of Kerry Dairy Ireland will consist of up to 13 directors comprised of seven co-op directors, three individuals nominated by Kerry, two independent directors, who the co-op and Kerry may agree to appoint to the board from time to time, and the CEO of Kerry Dairy Ireland. Kerry Dairy Ireland will continue to be led by Pat Murphy as CEO (who Kerry Dairy Ireland has identified as a key individual important to the business) with support from Kerry Dairy Ireland’s existing, strong team of executives and employees.
Edmond Scanlon, chief executive officer of Kerry Group, says, “The proposed transaction represents a significant step in Kerry’s 50 year journey. 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 and nutrition solutions and an end-to-end industry leader in dairy. 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 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.”