Glanbia jumps after €107m takeover of US nutrition firm
Published 20/01/2011 | 05:00
SHARES in Glanbia jumped yesterday after the company said it would acquire an American nutrition business in a multi-million dollar deal and remained on target to increase full-year earnings per share by a fifth.
The agri-food company closed up 3.2pc at €4.08 after announcing it would buy the Florida based Bio-Engineered Supplements and Nutrition (BSN) for $144m (€107m). The business is being acquired on a debt-free basis and is to be financed through existing banking facilities.
A competitor of Optimum Nutrition, which Glanbia acquired in 2008, BSN specialises in particular in protein supplements and pre-workout powders for sports. Although focused mainly in the US, it also distributes to around 90 countries across the world.
Glanbia said BSN would be "earnings enhancing" in 2011. The business reported earnings before interest and tax of $10.1m (€7.48m) on the back of net revenue of €135.4m in 2009. By the end of 2009 it had gross assets of $30.5m (€22.6m).
Glanbia chief executive John Moloney said the acquisition would build on his company's position in the nutritional sector.
"It's a business we are familiar with since acquiring Optimum and they know us, both sides had been talking for some time.
"The deal means our global nutritional business will have sales of around €600m annually in only five years and increases our presence in the sector while growing our performance nutrition business. As well as this it will offer more research and development opportunities."
News of the takeover was announced as Glanbia said it expected to achieve its earnings targets after a "strong" full-year performance.
Stronger global dairy markets and "solid" demand in the nutritional sector mean the company should report 20pc growth in adjusted earnings per share for the full year while it is forecasting growth of between 11pc and 13pc for 2011.
In 2009 Glanbia reported earnings per share 30.68c. Net debt is slated to be €420m by year-end 2010.
A resurgent Dairy Ireland division thrived as higher commodity prices drove forward the Irish Dairy Ingredients space. Gains in that business helped offset struggles in the Irish consumer business which had another "tough year", according to Mr Moloney.
"The consumer business has taken a lot of hits, understandably given the state of the economy here, and while there has been no change in the consumer environment, we have made changes to position the business for growth," he said.
The US cheese business will return lower profits after the refurbishment of a plant as well as higher milk prices and a "weakening" of cheese prices.
Mr Moloney added that volume growth in the global nutritional business continued to outpace market growth rates and that arm of the business would underpin higher operating profits in US Cheese and Global Nutritionals for the full year.
Analysts welcomed the acquisition and trading statement, with John O'Reilly describing BSN as "a good fit for Glanbia".
NCB's Paul Meade took a similar view, raising the 2011 EPS estimate by 5pc and upgrading Glanbia to "buy".
"This significantly increases the quality of Glanbia's earnings and reduces its dependency on commodity dairy processing," he said.