Kerry Foods loses €20 million in blocked Breeo deal

Kerry Foods acquisition of Breeo would have given it significant advantage in the dairy market
Kerry Foods acquisition of Breeo would have given it significant advantage in the dairy market

All parties are said to be "very disappointed" following the decision by the Competition Authority to block the sale of Breeo Foods to the Kerry Group



11 September 2008 | 0

Kerry Foods acquisition of Breeo would have given it significant advantage in the dairy market

Last month the Competition Authority blocked the €165 million acquisition of Breeo Foods by the Kerry Group. The competition watchdog said that it had prevented the sale from taking place because it felt it would “substantially lessen competition” in the Irish consumer foods market. Breeo Foods, a subsidiary of Reox Holdings, owns the dairy brands Dairygold, Mitchelstown, Clavita and Sno, which when combined with Kerry Group’s own dairy portfolio accounts for a substantial portion of the market. In addition, the acquisition would have given Kerry Foods a significant advantage in cooked meats and chilled foods.

Unfortunately for the Kerry Group, it had already paid out a non-refundable deposit of €20 million to Reox Holdings before the Competition Authority’s decision had been announced. The payment was a precondition of the sale, which both parties had believed would take place without incident. Pat Keating of Keating & Associates, PR agent to Reox Holdings, said that the decision had been “dissapointing for all parties,” but that it would be “business as usual” for Breeo from now on.

The Kerry bid for Breeo Foods came after an unsolicited offer was made by equity and corporate finance firm, Ion Equity, in March of this year. “The subsequent offer from Kerry Foods represented compelling value for Reox shareholders,” said Flor Riordan, chairman of Reox Holdings, “We believe that the sale of the business to Kerry Foods was a good proposition for the Breeo business, its shareholders and staff, Irish consumers and the consumer foods market in this country.”
Although Reox has said it will review the Competition Authority’s decision in detail, it will be up to Kerry Foods to appeal it in the High Court, which would set a precedent in Ireland.

While the losses arising from the blocked deal represent a disappointment for Kerry, its H1 pre-tax profits published last month spelt good news for the group. Kerry Foods reports revenues of €132.8 million for the first half of the year, with sales in Kerry’s flavours and ingredients business up 7.8% to €1.66 billion. Overall, Kerry’s first-half net profit amounts to €105 million, with sales revenue of €2.3 billion, on a rise of 1.3%. In spite of increased costs and the pressure of weaker currencies this year, Kerry Group’s chief executive, Stan McCarthy, is confident that the company is in line to reach its annual profit target.

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