Kerry Group has “suspended” transaction talks with its largest shareholder Kerry Co-op, placing into serious doubt the sale of the food and ingredient group’s €800m-valued dairy products business.
Kerry Group confirmed, in February, that it was reviewing the future of its dairy business in Ireland and the UK in favour of a tighter focus on higher-margin taste and nutrition products.
While a number of options were being considered, a sale to Kerry Co-op — a 12% shareholder in Kerry Group — was the favoured avenue.
However, it is understood that the co-op’s proposals fell a long way short of Kerry Group’s expectations, floundering over valuation and financing options.
The dairy business includes Kerry Group's Dairygold butter spread products and various cheese products, including the Cheestrings brand. The division also includes Kerry Group's dairy processing business and its agri-business stores.
While talks with the co-op have not technically been terminated, all the indications are that a deal between the two parties is effectively off.
In a brief statement, Kerry Group said the strategic review of its dairy business continues but that there is “no certainty” that this will lead to a transaction.
"Kerry Group confirms that discussions with Kerry Co-Operative Creameries Limited, in relation to a potential transaction, have been suspended. While the strategic review continues, there is no certainty that this will lead to a transaction and a further update on the strategic review process will be communicated later this year," Kerry Group said.
While there has been speculation that a small number of other potential buyers have shown interest, it appears that Kerry Group is not close to any deal.
In response to the suspension of discussions, Kerry Co-op said it will remain open to “evaluating opportunities”.
“With the prime focus of protecting the interests of, and delivering for all its stakeholders, the Co-Op, over the past 18 months, engaged in a thoroughly professional approach to give this potential opportunity every possibility of success. We believe a fair valuation was put on the proposed transaction,” it said.
Kerry Group recently reported a drop in annual trading profit — to €797m from €903m — as Covid disruptions hit its bottom line.