This Week In The Market

It may have a bucket-load of debt after its biggest ever acquisition, but the market has given its thumbs-up to Kerry Group's £394 million acquisition of Dalgety Food Ingredients, a move that catapults very much into the front rank of the world's food ingredients companies. The shares closed the week on an all-time high of 805p.

With the acquisition of Dalgety and its spread of interests in the UK and continental Europe, Kerry is the unchallenged market leader in Europe and is vying for the world number one position, depending on one's definition of a food ingredient.

Then Kerry move was also welcomed by the market as shareholders are not being troubled to part-fund the acquisition through a share issue. Kerry could have raised about £60 million through a 5 per cent placing but instead decided to fund the entire deal through debt. The group has not ruled out a share issue in the future, but as things stand a placing or rights issue is not part of Denis Brosnan's thought process.

The big surprise was not that Kerry won the bidding battle for Dalgety, but that it has said that it intends to hold on to all the Dalgety operations, including the Spillers flour milling business. Kerry has said that the flour milling business fits in with its own bakery ingredients business and will be retained.

Some analysts, however, are not convinced and believe that Kerry would be open to a sale of the flour milling business if it got the right price. With debt of £660 million, NCB analyst John Conway has suggested that the Bakers Aid subsidiary in the US - on the block but withdrawn from sale last year - and Spillers Milling could be sold to reduce the debt mountain.

That said, the industry believes that Kerry will continue its tentative expansion into emerging markets. After the Malaysian acquisition late last year, the next international move is expected to be in Brazil where an acquisition is thought to be close.

The other major news - and not very pleasant news at that - was the shock announcement from Powerscreen of a £50 million black hole at its Matbro subsidiary. The end result is that Powerscreen shares were decimated and are now trading on a rating where the group must be seen as a potential takeover target.

American investors, who hold around 40 per cent of the shares, tend to be an unforgiving lot and would probably view the future of Poweerscreen under its current management with some trepidation. Equally forgiving will be the investors who stumped up 625p sterling a share last December when Powerscreen placed three million shares to fund the acquisition of SDC Trailers. Those same shares were trading at 260p sterling yesterday.

Athlone Extrusions will the 1998 market debutant when it begins trading in Dublin and London next Thursday. Athlone is likely to be an unspectacular but steady company and dealers believe that there is little likelihood of a big premium on the 91p placing price when trading begins.

Otherwise, it was a case of steady gains for the market, boosted by the strength of London and Wall Street. The US market seems to have finally decided that Bill Clinton's problems are not a factor that should influence trading, especially at it now seems that his position is save.