Kerry buys two US food ingredients groups for $67m

KERRY GROUP pushed its spend on bolt-on acquisitions this year to $135 million with the purchase of two US-based food ingredients businesses, Guernsey Bel and Pacific Seasonings, for $67m yesterday.

It is expected the new companies, which are regarded as strategic fits with the company’s existing US businesses, will add 45m to sales in 2003, pushing them over €3.8bn this year and on course to break €4bn in 2004.

Operating profits are expected to benefit to the tune of at least €45 million. Further acquisitions are expected during the year as Kerry’s worldwide workforce heads to 19,000, with more than 3,000 of these based in the US.

The announcement was well received by stockbroking analysts, with Merrion’s Niamh Brodie noting that both companies are a good strategic fit with Kerry’s existing North American operations and are in higher growth areas of the ingredients industry.

“Kerry is demonstrating a continued ability to find small to medium-sized investments that will enable the company to maintain earnings momentum and earn attractive returns on capital. We maintain our buy recommendation,” she added.

Guernsey Bel, a leading manufacturer of inclusions for frozen desserts, and Pacific Seasonings, a leading manufacturer of seasonings to the meat, prepared foods and foodservice industries, were bought for $67m. Earlier this year, Kerry bought SunPure, a significant producer of apple essence and beverage flavours and bases in Florida for $68m.

Pacific Seasonings’ Seattle-based operation is organic-certified, which is ideally positioned for growth in the world’s largest market for organic products, according to Kerry Group MD Hugh Friel.

Commenting on the acquisition, Davy Stockbrokers analyst John O’Reilly said Kerry’s acquisition of Shade in 1998 was Kerry’s seminal investment in sweet ingredients.

Mr O’Reilly said sweet ingredients are, “best understood as opposite to savoury ingredients; it has nothing to do with sweeteners.”

Mr O’Reilly said that since the purchase of Shade, Kerry, with a number of add-ons, has set about building its customary strong absolute and relative position in the segment.