Kerry Group in €33m bid for cheesemaking co-op
Foods giant says offer is growth opportunity for Newmarket Creameries
AGRI foods giant Kerry Group has made a formal offer for the Cork-based Newmarket Creameries co-op.
Kerry's offer of €421 per share values Newmarket Creameries, including debt, at €33m.
The deal need to be approved by two thirds of Newmarket's shareholders.
The shareholders have until September 10 to accept Kerry's offer, which would be worth about €39,000 to every one of the 680 Newmarket shareholders.
"The committee of Newmarket Co-operative has been advised by accountants PricewaterhouseCoopers that the Kerry offer represents fair value for the shares in Newmarket.
"Accordingly the offer is being put to the members for the members to decide upon," said a spokesman for Newmarket.
In a letter to shareholders, chairman Patrick McAuliffe and chief executive Michael Cronin confirmed the offer and called an information meeting for them on 25 August.
A special general meeting has been set for September 2 to approve a number of rule changes that must be passed to allow a sale to go ahead.
Kerry chief executive, Stan McCarthy said the purchase would represent "a positive growth and business development opportunity in the interest of all stakeholders in both companies".
Newmarket is an established cheese supplier to Kerry, with an annual manufacturing capacity of about 35,000 tonnes. It had turnover of more than €56m last year -- when it is estimated to have made between 15,000 and 20,000 tonnes of cheese.
Only about 20pc of its shareholders are milk producers. They would be awarded 5,694 shares, depending on their 2009/10 milk supply. Those shares are thought to be worth about 30c per gallon of milk they supply.
The offer concludes a process that has seen months of speculation that Kerry would make an offer for the cheesemaker. Press reports had speculated that the offer could be anywhere between €23m and €35m.
Joe Gill, an analyst at Bloxham stockbrokers, said a deal made sense for both sides.
"The acquisition suits both businesses because Kerry get the extra cheesemaking capacity at Newmarket's plant while Newmarket would get access to an established supply structure in the UK and elsewhere for their products," he said.
"It would also plug Newmarket into a big player and give them greater scope when negotiating with suppliers."
"Without a deal of this type it's difficult to see how Newmarket would be able to grow their business so it would seem to suit shareholders to agree to this offer," he said.
Kerry shares closed up 2.2pc, or 54 cent to end the day at €25.10, just shy of their year high.