Greencore to sell malt firm for €116m

GREENCORE is to sell its malt business to Axéréal Union De Coopératives Agricoles for €116.25 million.

Souffle Group, another major player in the French malting business, had been lead contender to buy the business but is understood to have backed out of the deal due to differences over property transfers and the depressed global market.

The Irish-listed group said assets of about 50 acres are excluded from the deal, including lands at Athy, Co Kildare, which were part of Minch Malt.

Souffle is understood to have offered €120m for the business, including the land.

Greencore Malt consists of seven plants, including three in Britain with a combined capacity of 500,000 tonnes.

Sales of €217.2m were achieved in 2009, while operating profits of over €20m were returned.

Greencore will use the cash from the deal to reduce its debt burden further.

Under the terms of the deal, the group will retain insurance proceeds of €6.4m related to reconstruction costs at Greencore Malt’s malting facility at Ghlin, Belgium, in 2008.

IFA president John Bryan said he would be seeking an early meeting with the new owners and with Greencore to ensure growers’ contracts are guaranteed in the future.

It is important also that Diageo, the biggest user of malt in Ireland, pledges support to growers, he said.

“The new owners must recognise that the viability of the malting business in this country depends on growers making a margin over costs,” IFA grain committee chairman Noel Delany said.

Greencore chief executive Patrick Coveney said “today’s transaction completes Greencore’s journey into a focused convenience foods player with clear leadership positions in the UK market and a growing regional presence in North America. Having tested the market with several potential purchasers, we believe the transaction announced today represents an excellent deal for shareholders but also one that will provide enhanced opportunities for Greencore Malt’s suppliers, customers and employees.”

The group, which held its AGM in Dublin yesterday, said it is continuing to develop markets in the US, which it moved into in 2008. Convenience foods, predominantly British based at this point, saw a strong start to the year with sales and operating profit growth delivered year-on-year.

The group said trading at the beginning of 2009 was particularly weak, reflecting the poor global trading environment.

Greencore said its ingredients and related property division has performed in line with expectations.

Currency is less of an issue than it was over the previous two years, it said.

At the AGM, chairman Ned Sullivan told shareholders the group was well capitalised with sufficient funds to support the group’s day-to-day operations and development. Though encouraged by the good start to the year, Mr Sullivan said “we remain appropriately cautious about the consumer environment for the remainder of the year”.

Shares in the group were up five cent to €1.38 in Dublin in early trading yesterday morning.