Kerry Group Is Said to Weigh Options for Consumer Food Unit

(Bloomberg) -- Kerry Group Plc is considering strategic options for its consumer food business, home of the popular Richmond sausages brand, in a move that could free up money for acquisitions, people familiar with the matter said.

The Irish company is reviewing its ownership of Kerry Foods, which sells chilled meat and dairy products, according to the people. It could pursue a sale or spinoff of part or all of the business next year if it decides to proceed, the people said, asking not to be identified because the information is private.

The non-dairy consumer food assets, which include Rollover hot dogs and Naked Glory meat substitutes, are seen as easier to divest and could attract interest from private equity firms, the people said. Kerry Foods also sells Dairygold brand spreads, Charleville cheese and Cheestrings snacks.

Any deal involving the dairy business would likely require negotiations with Kerry Co-Operative Creameries Ltd., an Irish farming collective that is Kerry Group’s largest shareholder. The consumer foods business as a whole may be valued in the billions of euros, the people said.

“Investors have long questioned Kerry’s strategic rationale for owning the business, which has limited synergies with and structurally slower growth prospects than its core Taste & Nutrition unit,” Alex Sloane, an analyst at Barclays Plc, wrote in a note to clients Friday.

Deal Pipeline

Shares of Kerry rose as much as 3.6% in Dublin trading Friday, the biggest intraday gain in a month. They were up 3.3% at 2:35 p.m., giving the company a market value of 21.6 billion euros ($26 billion).

A disposal would help raise funds for Kerry to expand its main food ingredients business through acquisitions. Kerry, which makes flavors and sweeteners, has a “strong” pipeline of potential takeover targets, Chief Executive Officer Edmond Scanlon said on a November conference call. It was one of the bidders for DuPont Inc.’s nutrition arm last year before losing out to International Flavors & Fragrances Inc.

“Kerry has a strong track record of shareholder value creation through more than two decades of bolt-on M&A,” wrote Sloane. “We like that Kerry has flexibility to potentially add selected ingredient technologies that it can use its global footprint to scale.”

Deliberations are at an early stage, and Kerry hasn’t made a final decision on the timing or method of any divestment, the people said. It could still opt to keep the business, according to the people. A representative for Tralee, Ireland-based Kerry said the company doesn’t comment on rumors or speculation.

Revenue from Kerry’s consumer foods division fell 2% last year to 1.3 billion euros. It accounted for 18% of the group’s sales, according to data compiled by Bloomberg.

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