News

Kerry Group prepares to divest dairy operations

Kerry Group is to sell its dairy business, whose brands include Cheestrings, Dairygold, and Kerrymaid, for an expected €500 million in order to focus on its B2B taste and nutrition business.

In a move expected to be worth a total consideration of €500 million, Kerry Group plans to sell its dairy operations, Kerry Dairy Holdings, to its Kerry Co-Operative Creameries Limited business, (the Co-Op). On entering the agreement, Kerry will keep its dairy activities as part of its broader business.

Announced on 12 November, Kerry Group's divestment represents its efforts to become a 'pure play' taste and nutrition company.

Creating two leading companies

Kerry strives to create two leading businesses, Kerry Group and Kerry Dairy Ireland. The divestment aims to enable both to better focus on their individual strategies and capital allocation priorities.

As part of the transaction, Kerry Group strives will position its business as a leading taste and nutrition solutions provider for food and beverages. Evolving to a new ownership model, Kerry Dairy Ireland will centre its business on being a leading Irish dairy consumer products and dairy ingredients provider.

Kerry Dairy Ireland specialises in dairy consumer products that sit within supermarkets' chilled cabinets around the UK and Ireland. Its product portfolio comprises cheese, cheese snacks, dairy snacks and dairy spreads from brands such as Cheestrings, Dairygold, Golden Cow, Kerrymaid and Low Low.

Kerry Group's dairy operations also comprise its dairy ingredients business. It provides numerous dairy ingredients, including functional dairy proteins, nutritional dairy bases and cheese systems. The company also includes agribusiness products and services.

Kerry Dairy Ireland generated €1.28 billion in revenue for the fiscal year 2023. However, despite its multi-billion revenue demonstrating its sizable share of the market, this figure represents a drop from the company’s 2022 revenue, which sat at €1.54 billion.

Business members will become shareholders

As part of Kerry Group's planned sale within the company, Co-Op members will become direct owners of Kerry shares.

Providing they meet the specific requirements of the proposed transaction, these shares will be equivalent to 85% of the Co-Op's existing shareholding. Co-Op's remaining 15% shareholding in Kerry will be redeemed as part of the business divestment consideration.

"We are very pleased to have reached an agreement that will ultimately deliver full ownership of one of the leading dairy businesses in the country while also, in effect, releasing c.85% of Kerry Co-Op's Kerry Group shares into the hands of our members to be retained or sold by each of them at a time of their choosing," said James Tangney, Chairman of Kerry Co-Op.

Under its proposed transaction, the Co-Op will first acquire a 70% interest in Dairy Ireland, noted as the first phase of the transaction. Kerry will keep the remaining 30% interest. The parties have also agreed to an arrangement that will see this 30% interest in Kerry Dairy Ireland move to the Co-Op in the coming years, which represents the second phase of its transaction.

Building on their shared history and 50 year-partnership, the companies strive to create value, spur change and shape the dairy industry. "As direct shareholders in the plc, members will continue to gain from the Group's progress and, in tandem, the Co-Op will focus on ensuring Kerry Dairy Ireland becomes a platform for future growth," added Tangney.

Moving to taste and nutrition

Kerry has stated that its proposed transaction is a pivotal part of Kerry's plan to fully dedicate its operations to global taste and nutrition solutions. "The proposed transaction will result in a global leader in taste and nutrition solutions and an end-to-end industry leader in dairy," said Edmond Scanlon, CEO of Kerry Group.

The move follows the company's efforts to grow its portfolio, most notably in its proactive health, food protection, preservation and enzyme spaces. The transaction also involves divesting the company’s consumer foods meats and meals business and its sweet ingredients portfolio.

"On completion, Kerry will become a pure play global business to business taste & nutrition company, with sustainable nutrition at its core, while supporting our financial objectives of continued market outperformance, strong margin progression, and delivering greater returns for our shareholders," Scanlon added.

The company anticipates operational changes will improve its portfolio clarity, simplify its business structure, increase capital deployment focus across its taste and nutrition business and help Kerry pursue its strategic priorities.

Moving forward with its taste and nutrition plans

Kerry shareholders are expected to attend a general meeting and vote on the proposed transaction on 19 December 2024.

The company’s divestment plan is its latest announcement in recent weeks. Earlier in November 2024, Kerry announced its acquisition of DirectSens’ LactoSens technology, a lactose detection solution for the dairy industry. The technology is designed to provide food safety assurances by creating advanced enzyme-based biosensors.

In October 2024, Kerry also released its new tool, the Egg Reduction Guide, amid rising industry costs and sustainability concerns. The solution seeks to help manufacturers measure the financial and environmental value of reducing egg content in baked products, influencing the sector as a whole.