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Did Kerry pay over the odds for Breo?

DID Kerry over-pay when it shelled out €140m for the Breo branded foods business in 2009? The group's interim management statement, which was published last Wednesday, definitely pointed to some buyer's remorse on Kerry's part.

Once again the interim management statement demonstrated that Kerry is effectively two companies. While continuing sales at its ingredients division were up by 2.9 per cent in the first nine months of the year and overall sales, including acquisitions, rose by 14.8 per cent, the performance recorded by its consumer foods division was far more pedestrian.

Continuing consumer foods sales rose by a scarcely perceptible 0.5 per cent while the division's overall sales grew by 2.4 per cent. Kerry singled out the Irish consumer foods market for specific mention stating that it "remained challenging" which, translated into plain English, means that the group is being kicked to death on pricing by the food retailers it supplies.

The latest statement makes Kerry's deal to buy Breo, which included such brands as Dairygold and Galtee, for €165m in 2008 look even more ill-timed.

The Competition Authority objected to the deal and Kerry only secured its objective after a lengthy legal battle the following year. As a result of the delay Kerry was able to negotiate a €25m reduction in the Breo purchase price. Even that reduced price is now looking very expensive. Kerry must now surely regret not having used the Competition Authority's objections as an excuse to walk away from the deal altogether.

Sunday Indo Business