Kerry Group CEO Edmond Scanlon says ongoing joint venture talks with Kerry Co-op may run into the second half of this year.

Speaking to investors and analysts on Tuesday morning following the release of Kerry Group’s annual results for 2020, Scanlon said negotiations with Kerry Co-op are still at an early stage and agreeing a deal is not guaranteed.

When pressed on more details about the primary dairy business, Scanlon said the business had annual revenues of about €900m, with about 50% of sales coming from consumer foods products (butter spreads, cheese-strings, dairy brands etc) and the remaining 50% of sales coming from dairy ingredients in its taste and nutrition division.

Revenues

On the profits of business, Scanlon said the profit margins in the primary dairy business are “much lower” than the wider group profit margin.

However, the Kerry Group boss did say there is a mix of profitability across the business, with profit margins on consumer foods items higher than those of commodity dairy ingredients.

The Irish Farmers Journal understands staff at Kerry Group’s dairy processing sites in Ireland were informed of the joint venture negotiations with Kerry Co-op at a number of meetings on Tuesday morning.

As part of the joint venture deal, all staff and senior management in Kerry’s dairy business are expected to continue as normal in their current roles, despite the potential change of ownership structure.

Joint venture

Last month, Kerry Co-op formally submitted a €480m offer to buy a 60% majority stake in Kerry Group’s primary dairy business.

The business includes three milk processing plants in Ireland (Newmarket, Listowel and Charleville), as well as a dairy spreads business in the UK.

In total, Kerry’s dairy business processes 1.2bn litres of milk in Ireland, making it one of the ‘big four’ dairy processors in the country.

Due diligence

It’s understood Kerry Co-op and Kerry Group are now engaged in a detailed due diligence process, where Kerry Co-op will be given access to the financial accounts of the primary dairy business for the first time.

Once this process is concluded, both sides will need to agree on a valuation for the business and clarify exactly how much Kerry Co-op will need to pay for its 60% majority stake in the business.

Kerry Co-op has yet to set out to shareholders how it plans to fund this transaction.