Greencore to sell malt business for up to €116m

GREENCORE HAS signalled a further move away from its Irish business and an increasing focus on the UK and US convenience food markets with the announcement that it is to sell its malt business to French co-operative Axéréal Union De Coopératives Agricoles in a deal worth up to €116.25 million.

The disposal, which had been flagged, will net the Irish-listed company €112 million upon completion, subject to a €5 million reduction for net debt and about €5.6 million to fund a pension deficit at its UK pension scheme.

In addition, the company will receive a deferred cash consideration of €1.25 million on the first anniversary of completion and cash consideration of up to €3 million depending on earnings.

The group said yesterday it would use the sale proceeds to reduce its borrowings. Its malt division comprises three malt businesses based in Britain, Ireland and Belgium. It said yesterday that lands at Athy, Co Kildare, which were held by the Irish malt division, Minch Mart, would not be included in the sale.

A spokesman for Axéréal said the French co-op fully intended to continue the Irish malt operation. The current head of Greencore Malt, David Wilkes, will assume the role of deputy chief executive of Antwerp-based Boortmalt Group, the subsidiary of Axéréal which bought the malt business.

It is understood that contact was made with Axéréal about the purchase by NCB stockbrokers last summer, with discussion beginning in earnest in November.

Greencore yesterday said there had been four possible purchasers.

IFA president John Bryan yesterday welcomed Axéréal’s pledge to support growers in Ireland, adding it was important that Diageo also gave a commitment to support growers who had consistently delivered a quality product.

After its agm in Dublin yesterday, chief executive Patrick Coveney said the Irish business would generate €100 to €150 million in revenues this year, representing about 10 per cent of the company’s overall revenue. About 60 to 65 per cent of the group’s revenues were generated by its UK business, with the remainder divided between its European and US markets, he said.

Mr Coveney and Greencore chairman Ned Sullivan stressed the increasing importance of the US market to Greencore’s strategy at yesterday’s agm.

In an interim management statement released before the agm yesterday, the company said it delivered a good performance in 2009 despite the challenging consumer environment, and said “firm foundations” had been laid. Its convenience foods business had a particularly strong start to the current financial year, the firm said.

Sales in the first quarter of fiscal 2010 were €220.2 million, 6.5 per cent ahead of the first quarter of last year on a constant currency basis. Adjusted earnings per share for the group was 17.4 cent.