Food giant Kerry has agreed to sell its sweet ingredients business to US equity firm Advent International for €500 million.
The Iseq-listed company has been selling-off some of its older, legacy food businesses while investing in higher-margin assets, particularly in the plant-based, authentic taste, proactive health segment of the industry.
Kerry’s sweet ingredients division is a leading manufacturer of sweet and cereal products, employing more than 1,100 staff across 10 manufacturing plants, six in Europe and four in the US. It makes a range of ingredients, from sweet particulates and chocolate confections to baked inclusions and fruit purées, and had revenues of approximately €405 million last year.
Kerry said that if the sale to Advent’s IRCA portfolio company proceeds it will use the money raised for “general corporate purposes” and the continued development of its taste and nutrition (T&N) business.
Any sale is conditional upon the relevant regulatory approvals as well as routine closing adjustments, the company said. The relevant Kerry staff are expected to transfer to IRCA as part of the deal.
“We are pleased to have entered exclusive negotiations with IRCA, who have a strong track record of developing their business within the category,” Kerry chief executive Edmond Scanlon said. “This transaction would represent another strategic development in Kerry’s evolution as we continue to look to enhance and refine our T & portfolio, aligned to the areas where we can create the most value.”
In 2021 Kerry sold its British and Irish consumer foods’ meats and meals business to US poultry producer Pilgrim’s Pride for €819 million.
While a deal to sell its legacy dairy business, which includes brands such as Dairygold, Charleville and Kerry Low-Low spread, to the Kerry Co-op, the PLC’s largest shareholder, has hit stumbling blocks, it is still on the table.
Divesting of some of its older food businesses is part of the company’s new strategic focus on the plant-based, proactive health, authentic taste and food preservation segments of the industry, which deliver higher returns.
The company recently acquired preservatives-maker Niacet for €853 million. At the time Kerry said the acquisition would strengthen its position in the market with the addition of “complementary technologies” while also accelerating its growth.
Goodbody analyst Jason Molins said: “While we are somewhat surprised to see the group announce a disposal within the T & N portfolio, the strategic rationale for disposing a lower growth and lower margin profile business stacks up. We also note that this business was less focused on delivering against Kerry’s sustainable nutrition agenda.”
Mr Molins said: “We consider the deal multiple as attractive and note that it leaves the group with additional firepower to expand into higher growth categories (eg food waste, clean label, proactive and personalised nutrition, plant-based and authentic taste), whilst also giving scope to increase shareholder returns.”
Kerry’s deal is expected to close in the first half of 2023 following the employee consultation and information processes and receipt of regulatory approvals.
Francesco Casiraghi, managing director at Advent International, said: “We are delighted to welcome this best-in-class sweet ingredients business to the IRCA family, which would represent a major step in our goal of creating a genuine global leader in semi-finished food ingredients. There are so many exciting long-term opportunities for this combination, and we look forward to supporting the management team in this next phase of growth for the business.”