Kerry Group agrees fresh dairy joint venture with Kerry Co-op

Kerry Group and its main shareholder, Kerry Co-op, have reached a fresh agreement on a joint venture for the publicly-quoted food giant’s dairy division, according to sources.
The deal, set to be unveiled on Tuesday morning, would see the co-op initially take a 70 per cent stake in the venture for about €350 million, putting a €500 million valuation on the business, they said.
Kerry co-op is expected to ultimately buy the remainder of the dairy business, called Dairy Ireland, covering milk processing plants in the Republic and the UK, within five years for €150 million. The unit owns brands such as Charleville cheese and Cheestrings snacks.
The outline of the accord, which follows the collapse in early 2021 of an original joint venture, was first reported on Monday evening by the Farmers Journal and Agriland publications.
Spokesmen for Kerry Group and Kerry Co-op declined to comment when contacted by The Irish Times.
Talks between both sides broke down in April 2021 after 18 months of negotiations, after Kerry Group rejected the co-op’s initial bid for a 60 per cent stake in the dairy processing business that would have valued the entire business at €600 million. Kerry Group was said to have placed a valuation expectation on the dairy unit of about €800 million at the time.
Kerry co-op owns about 11.3 per cent of the listed company, more than double the 5.1 per cent interest held by the second-largest shareholder, US investment giant Blackrock.
Kerry Group, which floated on the stock market in 1986 and is currently led by chief executive Edmond Scanlon, has long left its dairy co-op roots behind to become a global taste and nutrition giant.
The taste and nutrition division accounted for 86 per cent of the group’s €8 billion of revenues last year and 96 per cent of its €1.2 billion earnings before interest, tax, depreciation and amortisation (Ebitda).
The development comes three years after Kerry Group sold its UK and Irish consumer foods’ meats and meals business – including brands such as Denny, Galtee and Richmond – to US poultry producer Pilgrim’s Pride for €819 million.
The board of the co-op drafted in a veteran of the industry – former Dairygold boss Jim Woulfe – early last year to advise on a strategic review, which ultimately led to a return of both sides to the negotiating table.
The latest deal will need the approval of shareholders of both companies. It follows Glanbia initially selling a 60 per cent in its Dairy Ireland segment to Glanbia Co-op in 2017, with the remaining 40 per cent being transferred five years later.
Kerry Group reported on October 2rth that its volumes rose in the third quarter as the company remained on track to meet guidance for the year.
However, the group noted consumer demand across many food and beverage markets remained relatively muted, a consequence of the inflation experienced in many of its markets.
The Dublin-listed group said overall volumes were up 4.3 per cent in the third quarter of the year, with its more significant taste and nutrition unit growing 3.4 per cent. Growth was driven by the Americas, a good performance in the Asia Pacific, Middle East and Africa regions, with more positive volumes in Europe in the third quarter.
The Dairy Ireland business, which had been hit by falling prices in the first six months of the year, saw volume growth of 0.4 per cent in the year to date, with the third quarter recording a 5.7 per cent increase. Pricing was lower over the year to date, down 3.1 per cent, but the third quarter was more positive.