Farming & Food

Kerry pushes deeper into fast-growing ingredients sector

Company’s sale of chilled meats and convenience division gives it a war chest for acquisitions

Kerry CEO Edmond Scanlon. “This transaction further enhances Kerry’s focus as a leading business to business ingredient solutions provider for the food, beverage and pharmaceutical markets.” Photograph: Tom Honan

Sat Jun 19 2021 - 06:15

Kerry Group’s growth model is now firmly centred on shedding legacy businesses and acquiring strategic assets to allow it to increase its footprint in the fast-growing ingredients sector, where margins are stronger.

Late on Thursday night it announced the sale of its chilled meats and convenience meals division to US food company Pilgrim’s Pride for €819 million in cash.

The meats business includes branded and private label meats, meat snacks, food-to-go and meat-free products in the UK and Ireland.The brands include Denny, Galtee, Richmond, Fridge Raiders and Rollover.

"This transaction further enhances Kerry's focus as a leading business to business ingredient solutions provider for the food, beverage and pharmaceutical markets," said Kerry chief executive Edmond Scanlon.

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News of the transaction triggered only a modest rise in the company’s share price, but the move had been baked into projections for months.

The cash injection is likely to fund acquisitions in the ingredients sector.

" We would expect proceeds to be redeployed towards both organic and inorganic opportunities, and coupled with existing debt facilities we estimate it will give the business up to circa €2.5 billion of financial firepower," said Goodbody analyst Jason Molins.

“Kerry’s share price has underperformed its peer set since the start of Covid, and we would expect this announcement will help narrow that gap,” he added.

The company may have had an even bigger war chest if it had managed to offload its dairy business to Kerry Co-op, but talks were suspended in April. While there are rumours that the co-op is still interested, the company says a transaction is off the table for the moment.

The growing complexity of its ingredients business is illustrated by Kerry's acquisition of Canadian probiotics company Bio-K Plus International, last year. Kerry Group is in the process of working Bio-K's suite of biotics into a new line of functional foods, beverages and supplements, expanding its own suite of products while acquiring a profitable business in its own right.

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