Kerry in talks to buy flavours business of US food giant

KERRY GROUP has entered exclusive talks to buy the flavours business of US food giant Cargill.

Although both parties declined to disclose the potential price of the deal, market sources estimate the transaction could be worth up to €200 million.

Kerry’s share price rose by 2 per cent, or 55 cents, yesterday in Dublin after the deal was announced during afternoon trading.

Both companies have begun consultation processes with employee representative bodies, a process which should take four to six weeks. The deal will possibly be finalised by the beginning of September, with the deal completed towards the end of the year.

US-based Cargill is one of the world’s largest agri-food companies. It is also the largest privately-held company in the world.

Founded in 1865, 90 per cent of the company’s stock is owned by members of the Cargill family, with the remainder owned by employees through an employee share-ownership scheme.

The company’s main activities are in the field of agri-business and commodities. Over the last decade it has increased its presence in the ingredients and flavours business, boosted by the acquisition of Degussa Food in 2006 for €600 million.

Its flavour division is believed to have had revenues of $200 million last year. It employs approximately 700 people in 22 countries.

Cargill’s flavours division produces flavour solutions for different categories of beverages and dairy-based food products such as cheese, yoghurts and ice creams, though it is predominantly focused on the drink sector.

It is one of the top 10 flavours companies in the world, and holds contracts with most of the world’s largest food companies.

The proposed acquisition will help Kerry Group solidify its global position in the ingredients and flavours business. Kerry Group has been expanding the division over the last decade.

Approximately two-thirds of Kerry’s €5 billion revenue and 75 per cent of profits last year derived from its ingredients and flavours business.

This expansion has been driven by the acquisition of a number of small to medium-sized flavours and food ingredients companies. The acquisition of Cargill’s flavours division would be one of the largest acquisitions by Kerry Group in the last couple of years.

The Tralee-headquartered company, which completed 10 bolt-on acquisitions last year, signalled this year it could spend up to €1 billion on acquisitions this year if necessary.

The acquisition of Cargill would boost Kerry’s presence in the beverage sector. Cargill’s flavour division’s also has a broad geographic base, with a significant presence in developing markets such as India, parts of Asia and South America, which will increase Kerry’s global reach.