C&C to pay €233m for leader in US cider market as it expands
DRINKS company C&C plans to buy a US cider business. The announcement sent shares up even as the company reported half-year results that missed market forecasts.
The firm said it would pay $305m (€233m) for the Vermont Hard Cider Company (VHCC), the leader in the US cider market.
The deal, which is being financed out of C&C's existing credit facilities and cash reserves, will be earnings accretive immediately.
For 2012, the company and its brand Woodchuck Cider is expected to generate earnings before interest, tax, depreciation and amortisation of $15m.
C&C chief executive Stephen Glancey said the deal would increase the firm's growth in the US. "This transaction transforms our international cider business and accelerates our growth prospects.
"We intend to invest in the company to capitalise on the growth opportunities presented by this business," he added.
The deal continues C&C's foray into North America. Last year it bought Hornsbys, the number two brand in a US market which remains small but is growing rapidly. The cider business there totals about 700,000 hectolitres (123.1 million pints).
C&C's flagship brand Bulmers sells around 500,000 hectolitres in Ireland alone. The US market, however, has grown by about 60pc in the last six years and it is that growth that C&C is trying to tap into.
Chief financial officer Kenny Neison told reporters yesterday that C&C would focus on growing the business in the US first but added it was likely the Woodchuck brand would appear in the UK and Ireland eventually.
"We are buying the business with a view to investing in and extending the production capability in Vermont. There is no reason why we can't bring Woodchuck into established markets here," he claimed.
To that end, C&C is likely to invest between $25m and $30m in a new factory for VHCC.
The acquisition overshadowed what were poor half-year results for C&C, which was hit by weakening sales in Ireland and the UK.
For the six months to the end of August, net revenue slid 2pc to €263.4m, while operating profit before exceptionals dipped 2.7pc to €65.6m.
The Irish market was particularly tough, with revenues here falling 12.3pc, while operating profit plummeted by nearly a fifth to €21.9m.
"This was primarily driven by declining volume and increased promotional activity in the off-trade channel. This price deflation, coupled with a growing proportion of lower value beer sales, resulted in a price/mix decline of 9.1pc.
"Bulmers' average off-trade price premium to LAD (long alcoholic drinks) reduced by 6.0ppts to an average premium of 21pc. Volume declined 3.2pc primarily due to lower on-trade consumption of cider," the firm added.
"Trading has been challenging," said Mr Neison. "Wet weather continued into June, and major tournaments such as the Olympics and Euro 2012 provided little uplift."
The company said guidance for the full year would be at the "lower end" of expectations while the first-half dividend of 4c is up 9pc on last year.
Meanwhile, Philip Lynch is to step down as a company director. He will be replaced by Joris Brahms, the head of C&C's international business.
Shares closed at €3.80, a rise of 0.72pc.