DCC pays £6m for a 50% stake in Kylemore food group

Industrial holding group DCC has agreed to acquire a 50 per cent stake in the Kylemore bakery, shops and restaurant company for £6 million. The existing shareholders in Kylemore, led by its managing director and principal shareholder, Mr Brian Hogan, will hold the remaining 50 per cent.

The transaction involves a new company, Sparrowrock, taking over the Kylemore companies from Mr Hogan and family interests for £14 million. The consideration consists of £6 million in ordinary Sparrowrock shares, £5.7 million in five-year loan notes and £2.3 million in cash. The £6 million invested by DCC will go towards clearing a £3.2 million bank loan in Kylemore and £2.3 million towards the cash payment. Sparrowrock will start off debt free with the exception of the loan notes due to Mr Hogan and family interests.

The consideration represents a 6.7 multiple on the operating profit of £2.1 million generated by Kylemore in the year to April 30th, 1998. It generated sales of £26.2 million on net assets of £9.3 million. Kylemore group, which has 500 full-time and 200 part-time employees, is undergoing a substantial investment programme and is well placed to benefit from the increasing consumption of fresh bakery products and, through its restaurant and shop operations, from the growing trend of eating out, said Mr David Sharpe, director, DCC Foods. Mr Jim Flavin, chief executive and deputy chairman of DCC plc, said the "investment in Kylemore, and our partnership with Brian Hogan will provide DCC Foods with a platform to develop into fresh food manufacturing and Kylemore's retail operations will provide a new dimension to DCC Foods' growing activities in the catering sector".

He also said DCC Foods would work with Kylemore to develop hot beverages within its restaurants and retail outlets under the Robert Roberts brand. "We will also be seeking to achieve benefits in transport and distribution through co-operation with DCC Foods' 50 per cent associate company, Allied Foods."

Mr Hogan will join the DCC Foods board following approval of the deal by the regulatory bodies. DCC and Kylemore will have equal representation on the Sparrowrock board.

Kylemore has a 130,000 sq ft bakery operation located on an eight-acre freehold site in Finglas where fresh breads, confectionery and burger buns are produced, together with frozen par-baked baguettes. It has 25 bread shops around the Republic and some of these are being expanded to offer food under the "Kylemore Express" brand.