Barry’s Tea in joint venture deal

BARRY’S TEA has entered a joint venture arrangement with Bank of Scotland’s ICC Venture Capital arm to spend €62.25m to buy Batchelor’s and Beck Smith, the Irish operations of British giant Northern Foods.

The deal is subject to clearance from the Competition Authority but as there are no overlaps with the existing Barry’s Tea operation, the deal is expected to get the go-ahead.

The surprise elements of the deal are the 50:50 split agreed by Barry’s with ICC Venture Capital and the massive €33m in accumulated cash balances held by Batchelor’s, for which the joint venture vehicle Maiden Acquisition Company Limited will also have to compensate Northern Foods.

The acquired assets are highly cash generative. In the year to March 2003, the businesses generated profit before tax of €7.9 million on turnover of €76 million. Northern acquired Batchelor’s in 1986 for £13 million and Beck Smith in 1991 for £1.5 million.

Northern Foods said the net assets, excluding cash, to be disposed of will be €24 million, together with goodwill of €15m.

The Irish business is not connected to Britain’s Batchelor’s soups, which was sold to Campbell Soup by Unilever in January 2001.

In a statement, Maiden Acquisition said in a statement: “the new owners’ plan for the business is to leave it intact under the current management team, so it will be very much business as usual for Batchelor’s 280 staff in Dublin, Athy and Belfast.

Maiden Acquisition Co will be appointing Claire Carroll of Bank of Scotland (Ireland), Tony Barry and Greg Butler of Barry’s Tea to the board of Batchelor’s.”

Barry’s managing director Tony Barry said: “we have been seeking to invest in a complementary, well-established food business with potential for growth, and Batchelor’s ideally suits our needs.”

Investment manager Bank of Scotland Claire Carroll said: “we are delighted to have the opportunity to participate in the future growth of this well recognised business, with such strong reputation and brands.”

Maiden get businesses producing food and drink products in Ireland under brands such as Batchelor’s, Sqeez, Amigo, Picnic and Lustre. In addition products are distributed on behalf of other manufacturers under the brands of Green Giant, Old El Paso and Fox’s Biscuits.

Northern Foods finance director Sean Christie said this disposal “continues our programme of adjusting Northern’s portfolio of activities to align the group ever more closely with some of the fastest growing sectors of the UK food market.

“Although they are non-core to Northern, Batchelor’s and Beck Smith are very solid businesses and we are pleased to be selling them to an Irish company with a strong heritage and excellent brands. I am sure that they will continue to prosper under their new ownership,” he added.