Kerry becomes biotech leader
In a detailed research note on Kerry Group Davy Stockbroker's food analyst John O'Reilly argues that the purchase of Quest adds a whole new pharma dimension to Kerry Group.
Mr O'Reilly believes the acquisition of Quest's food ingredients business from ICI marks a significant point of departure in Kerry's strategy.
"One that takes it deeply into biotechnology, more tellingly into science-led nutrition and into pharma foods prospectively.
"We believe that these new dimensions make Kerry an exciting story, because in locating it into high-end bio-science and proteins, it taps into a promising growth stream," he said.
Mr O'Reilly believes this is the future in food nutrition and medicine, with the relationship between them becoming ever more symbiotic.
"We believe that Quest, especially its fermentation and hydrolysates activities, adds a whole new dimension to Kerry, evolving it into high-end bio-science and proteins concern, a major growth platform," he said.
Mr O'Reilly said that while Quest does have food industry customer listings, many in common with Kerry, it has also has pharmaceutical sector listings for its highly specialised protein products, which are an essential component in the nutrient medium required by the bio-pharmaceutical industry for cell tissue culture.
"Quest has 27 patents filed under different technology categories; in proteins, yeast, cultures, emulsifiers and enzymes and we foresee Kerry's range of applications technologies embracing this for new ideas and product generation," said Mr O'Reilly.
Mr O'Reilly recognised the optimal impact of the acquisition will not be experienced for some time.
"Ultimately we believe that Kerry's strong capability for integrating businesses within its value network and or injecting greater momentum into acquisitions will result in Quest achieving mid-teen returns on capital," he said.
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