Glanbia €500m acquisition speculation

Speculation in the New York Post suggests that Glanbia is on the verge of making a $500m (€367m) acquisition of US-based CytoSport Inc, a sports nutrition company that owns the Muscle Milk brand among others.

CytoSport is jointly owned by private equity firm TSG Consumer Partners and the Pickett family who originally founded the CytoSport business back in 1998. CytoSport appointed a new CEO, Rob King, in July of this year and the firm is understood to have sales of $300m (€222m) and profits (EBITDA) of $30m (€22m).

A price tag of €367m would represent a profit multiple of 16.6 times, which is significantly higher than the income multiple paid by Glanbia for its previous nutrition acquisitions. Glanbia’s movement into the performance nutrition space following the acquisition of Performance Nutrition and Optimum Nutrition have transformed Glanbia from a low margin dairy commodity business into a high margin added value business with significant growth opportunities, something not lost on Glanbia’s shareholders in recent years.

The acquisition of Performance Nutrition then followed with the acquisition of BSN for €108m or just 8.3 times the firm’s EBITDA profits. The performance nutrition space has attracted a lot of admirers in recent years given the associated double digit margins and top line growth, thus the higher multiples now paid for such business. An acquisition of the order of €367m will stretch Glanbia finances but equally would represent another significant step in their rapid development in recent years.

Kerry Group to acquire Peperami

Increasing industry speculation suggests that Kerry is on the verge of acquiring meat snack brand Peperami. Peperami is a pork sausage snack manufactured by Unilever in Germany, Mexico and Britain. Kerry already owns the Mattessons brand among others.

If successful, the new acquisition would enable Kerry to add another strong brand to its stable of brands sold in Britain. Kerry has repeatedly outlined how strong brands has been the best defence against the recession across Ireland and Britain in recent years.

According to Unilever, the product was first shipped to Britain by accident in a container which was supposed to be carrying pate. The company decided to attempt to sell the shipment to the British market under the brand name ‘Peperami’. Several new varieties have been introduced over the years with varying degrees of success.

Dairy expansion

It is increasingly evident that the window for collaboration in terms of building new dairy processing facilities is closing. With 2015 fast approaching, investment decisions and capital expenditure must be secured and finalised in the coming months. While plans are already under way in GII and Dairygold, it is still not too late to agree a joint project that should facilitate lower development and lower processing costs.

Such lower costs will feed their way back to farmers in terms of higher milk prices.

Lakeland are fortunate with the additional processing capacity they can bring on stream for a relatively modest investment of €12m to €14m, where another 5t/hour dryer at Lough Egish can be re-opened which offers Lakeland the capacity to process 40% more milk in the years ahead.

Kerry and Carbery have already space processing capacity. However, the bulk of dairy expansion will happen within the Dairygold and GII catchment areas.

Now is the last chance to get long overdue consolidation within the Industry. Consolidation can take many forms; the most obvious to begin with is the sharing of processing facilities between Dairygold and GII.