Dairy Crest Group to reduce debt with sale of St Hubert spreads business

Dairy Crest Group is looking to sell its French branded spreads business, St Hubert, in a deal that analysts expect will fetch the dairy foods company about €360m.

A potential sale of the spreads business, considered by analysts to be the group’s “jewel in the crown”, could also help Dairy Crest reduce debt and focus on its British business.

Since acquiring the Hubert business in January 2007, Dairy Crest had been unable to make additional deals in continental Europe as it had planned, the company said in a statement.

Further deals in Europe had fallen flat as family-run businesses were hard to secure, its own balance sheet was constrained and rival Lactalis was snapping up much of what was on offer, Numis analyst Charles Pick said.

A sale would not just reduce Dairy Crest’s debt, but also help the company make strategic deals in Britain.

“It is a very profitable business and probably quite saleable in that respect. So we would expect almost the bulk of the group’s net debt to disappear if they can sell it,” Investec Bank analyst Nicola Mallard said.

The group had a net debt of about £365.3m (€437.5m) as of Sept 30, 2011. It bought St Hubert for about £250m (€300m) from Uniq, acquired by Irish food company Greencore last year.

“Without (St Hubert) the group’s profits will become more reliant on the UK market and within that, the struggling liquid milk sector,” Investec’s Mallard said.

The group’s shares rose 2% to 331.61p (€3.96) on the London Stock Exchange yesterday.

— Reuters