Kerry Group has moved into the food pharmaceuticals sector, paying $440 million (€350 million) for the Quest Food Ingredients group in one of its biggest acquisitions in recent years. The market responded positively and shares in Kerry Group closed up 43 cents yesterday at €15.85.
Quest, which is being bought from ICI, has operations in 23 countries, including a facility in Cork. It provides bio-ingredients and pharma-ingredients to the pharmaceutical, bakery, dairy, snack and confectionery market.
A Kerry Group spokesman said last night that the acquisition - which will he said would add to earnings per share from the first year - was a major development in Kerry's food ingredients business. He added that it had been one of several acquisitions in the pipeline.
Kerry will fund the acquisition through borrowings, using existing credit lines. Analysts said last night that the group had free cash flow of around €200 million last year and would be well able to fund the deal.
Kerry bought Quest from the giant chemicals group ICI which intends to restructure the overall Quest Group. With its headquarters in the Netherlands, Quest operates from nine major sourcing units, selling mainly to the US and European markets. Kerry is buying the food ingredients business and ICI is restructuring the flavourings and fragrances part of the operation.
Last year, Quest Food Ingredients had annual revenue of $255 million and earnings before interest tax, depreciation and amortisation of $37 million. The net asset value, including a 50 per cent investment in a unit in Malaysia is $150 million.
In a statement, Kerry chief executive Mr Hugh Friel said the acquisition would bring a number of new technology platforms to Kerry.
"With the increasing focus by the global food industry on the key areas of health, nutrition and food safety, this acquisition means additional exciting growth opportunities for the group."
He said Quest "had a longstanding relationship with the pharmaceuticals industry - through hydrolysed proteins used in cell tissue culture, specialist ingredients, tableting, therapeutic and nutritional products."
The company had an excellent market spread "extending Kerry's market reach particularly in eastern Europe and Asian markets and adding a new list of global customers".
Goodbody food analyst Mr Liam Igoe said the acquisition represented a good deal for Kerry and fitted in well with its existing portfolio of ingredients businesses.
He added that the company was paying a fairly full price. "It will be down to Kerry to improve the margins and the top line growth," he said.
