Joint venture in grain and feed business

ORIGIN Enterprises, a subsidiary of the speciality bakery group Aryzta, is to set up an all-Ireland grain and feed handling business.

The new venture involves the integration of Origin’s R&H Hall in the Republic and the animal feed businesses of both Origin and W&R Barnett in the North.

As part of the deal, Barnett will take a 50% stake in the Hall operations.

The payout to Origin by Barnett on completion of the deal is €26 million and is based on an enterprise value for Hall of €52m.

The business is expected to be earnings-neutral for the year ending July 31, 2011, and will be earnings-accretive in subsequent years.

Origin’s chief executive Tom O’Mahony said the transaction underpins the long-term sustainability and competitiveness of Ireland’s export-orientated agri-food industry.

The combined business brings together two of Ireland’s indigenous grain and non-grain feed ingredient importing businesses servicing the animal feed and cereal milling industries, he said.

The cash proceeds of €26m based on the agreed enterprise value, will initially be used to repay debt and ultimately to fund development of the group.

Hall generated an operating profit of €5.1m for the year ending 31 July 2010 on revenues of €301m.

The combined business will be led by a management team comprised of executives from both Hall and Barnett with Michael McAree nominated as managing director of the combined business.

A spokesman for Origin said that the lands linked to the Hall site in Cork Harbour stay with Origin, to be developed at a later date when the property market picks up.

Their value has since been marked down in the group’s books to reflect the downturn in the property market.