Kerry Group is likely to make a number of small-to-medium-sized acquisitions - between $10 million and $100 million - this year, but there will be no major acquisitions on the scale of DCA or Dalgety, Kerry chief executive Mr Denis Brosnan has stated.
Speaking after the Kerry annual general meeting on Tralee yesterday, Mr Brosanan said Kerry has been the acquirer of virtually every large food ingredients opportunity that has become available. "There was only two we didn't buy, and they were either too big or too expensive.
"There will be a number of acquisitions this year - in a range up to $100 million, but there won't be a big one. When there is a big one, there are very few people who can outwit you," he said.
But Mr Brosnan held out the prospect of Kerry becoming involved in a major consolidation in the food ingredients industry, where Kerry is one of the biggest groups in an industry which has ten substantial players with sales in excess of $1 billion.
"There will be consolidation in that sector, and we want to make sure that Kerry is the acquirer and not the acquiree," he stated.
Mr Brosnan accepted that Kerry Co-op's 37 per cent stake in Kerry Group is a strong defence against any predator but added: `It doesn't need to be as high as 37 per cent to be a defence mechanism, but if it fell below 20 per cent...."
Kerry Co-op reduced its stake in Kerry Group from 52 per cent to 37 per cent four years ago, and that Co-op stake can fall to a minimum of 20 per cent.
Mr Brosnan said that a major acquisition - $1 billion or more - would require equity funding. `We would like to see that Co-op 37 per cent reducing, either through a share exchange with the Co-op or by issuing equity through a rights issue for an acquisition. But we learnt from the last exchange (when the Co-op stake went from 52 per cent to 37 per cent) that it didn't improve liquidity in the shares because the farmers just didn't sell," he said.
Mr Brosnan said, however, "we need to get more of our stock traded." He said that institutional investors in the US who have bought into Kerry's competitors like McCormicks and IFF, "would love to invest in Kerry but there just isn't adequate stock for them."
For that reason, Mr Brosnan said, that there no immediate plans to take a listing in New York, but when the co-op's 37 per cent stake is reduced, Kerry will take a New York listing.
On rationalisation and restructuring in the Irish dairy industry, Mr Brosnan made it clear that Kerry is unlikely to be involved.
"Our goal from milk processing is to have minimal profits - enough to cover the cost of capital replacement," he said.
"I feel sorry for the likes of Glanbia where milk is their primary raw material and where the company has to try and give a return on that to plc shareholders."
