Wednesday 16 January 2019

Kerry buys bring 2018 M&A spend to €800m

Kerry Group chief executive Edmond Scanlon
Kerry Group chief executive Edmond Scanlon
John Mulligan

John Mulligan

Ingredients giant Kerry Foods has agreed to pay €325m for two acquisitions in the United States, bringing the group's total acquisition spend this year to more than €800m - its highest annual figure since 2015.

The company, whose chief executive is Edmond Scanlon, said it's buying the US arm of Ariake, a Japanese company, and the North American coatings and seasonings business of Southeastern Mills.

Kerry said the acquisitions will enhance its "foundational technology portfolio" and strengthen its food service positioning, in line with its strategic growth priorities.

The two operations being acquired have combined annualised revenues of about €125m, with the Southeastern Mills business accounting for the larger share of that figure.

Ariake's US division produces clean-label savoury taste products derived from poultry, pork and vegetables at a factory in Virginia.

Kerry said the business uses highly specialised extraction technologies.

The privately-owned Southeastern Mills business being bought by Kerry manufactures coatings and seasonings at a facility in Rome, Georgia.

It makes coatings, food bases, gravy, baking and seasoning mixes, with customers across the food processing, restaurant and food service distribution sectors.

Kerry said the unit will complement Kerry's taste portfolio and its offering in the meat end-use market.

Releasing results last month, Ariake said that its US subsidiary generated sales of 2.71bn yen (€21.1m) in the first half of its 2019 financial year. That was very slightly lower year-on-year.

Operating income at the unit for the period was 760m yen (€5.9m), which was 2.6pc lower year-on-year.

The group said that net sales in the US in the first half were sluggish despite growth in sales in the restaurant industry, due to a decline of sales to some processed food manufacturers. It added that profits declined due to an increase in storage expenses.

Kerry said that it's funding the two new acquisitions from existing lines of credit.

On completion of the deals, Kerry Group's balance sheet remains strong, Davy Stockbrokers pointed out, with a net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio of just one times.

Kerry's net debt was €1.4bn at the end of September.

Mr Scanlon has been CEO of Kerry for just over a year.

Soon after his appointment, he unveiled a new five-year plan for the group that has targeted an average of 10pc growth in earnings per share each year for five years.

Last month, Kerry reaffirmed its full-year guidance, with expected adjusted earnings per share growth of between 7pc and 10pc for 2018.

Irish Independent

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