Dive Brief:
- Kerry is negotiating the sale of its sweet ingredients portfolio to IRCA for 500 million euros ($537.6 million). If negotiations are successful, the sale is expected to close in the first half of 2023. IRCA is a Europe-based manufacturer of chocolate, creams and semi-finished food ingredients owned by private equity firm Advent International.
- Kerry’s sweet ingredients portfolio includes sweet and cereal products, which serves bakery, cereal, confectionery, dairy and ice cream markets in the U.S. and Europe. It includes four manufacturing facilities in the United States and six in Europe.
- While selling off different units has been a strategy for ingredient companies to become more focused, this is Kerry’s first large sale in some time. In the last two years, the Ireland-based ingredient powerhouse made several acquisitions, and its only divestiture was its business in Russia.
Dive Insight:
In response to a question about M&A in Kerry’s most recent earnings call in October, CEO Edmond Scanlon said he “would characterize our pipeline as continuing to be quite active.”
Of course, most of the investors and analysts were likely thinking about companies Kerry was looking to acquire. In 2020, the company shared its goal of reaching more than 2 billion people a day with its ingredients by 2030, and M&A seemed to be a big part of the company’s path to get there. Since 2021, Kerry has acquired Kraft Heinz’s business-to-business powdered cheese ingredient line, ayurvedic ingredients company Natreon, biotech companies C-LEcta and Enmex, functional ingredients company Biosearch Life and clean label preservatives maker Niacet.
In the release about the sweet ingredient sale negotiations, Scanlon said the transaction “would represent another strategic development in Kerry’s evolution, as we continue to look to enhance and refine our Taste & Nutrition portfolio, aligned to the areas where we can create the most value.”
The sweet ingredients portfolio includes sweet particulates, chocolate confections, baked inclusions and fruit purees. Kerry projected in the full year of 2022, the segment had revenues of 405 million euros ($435.6 million) and earnings before interest, taxes, depreciation or amortization of 41 million euros ($44.1 million). The merger would create a global leader in semi-finished food ingredients with around 1 billion euros ($1.08 billion) in revenues, the release said.
Jason Molins, an analyst from Ireland-based financial services firm Goodbody, told The Irish Times he was somewhat surprised by the sale announcement, but understood Kerry’s strategic rationale, especially because the segment had lower growth and a lower margin profile. Molins told the newspaper the deal would produce attractive multiples, helping Kerry further expand into higher-growth categories including food waste, clean labels, plant-based, personalized nutrition and improved taste.
Many other ingredient companies are selling off businesses in order to make their operations more focused on areas where they can grow. International Flavors & Fragrances CEO Frank Clyburn announced last month that the company would announce three major divestments in the first quarter of 2023 to bring the company $1.2 billion to put toward its debts. The first one, the $900 million sale of its Savory Solutions Group, has already been announced. In 2020, Chr. Hansen sold its natural colors business.
