Disposal of Malt
Greencore Group PLC
11 February 2010
GREENCORE GROUP PLC - PROPOSED DISPOSAL OF MALT BUSINESS
Greencore Group plc ("Greencore" or "the Group") announces that it has agreed to sell its malt business ("Greencore Malt" or the "Business") to AxéréalUnion De Coopératives Agricoles ("Axéréal") for consideration of up to €116.25 million (the "Disposal"). By virtue of the size of the Disposal relative to the Group, completion is, inter alia, conditional upon approval by Greencore shareholders. A circular containing further details relating to the Disposal and convening an Extraordinary General Meeting will be posted to shareholders shortly.
Greencore Malt principally comprises three Greencore owned malting businesses based in the United Kingdom (trading as Pauls Malt), Ireland (trading as Minch Malt) and Belgium (trading as Belgomalt). It is a leading European malting business with seven malting plants which have a combined annual output capacity of approximately 520,000 tonnes. In addition, Greencore Malt also operates a consultancy arm, Global Malting Services.
The table below summarises the trading results of Greencore Malt for the years ended 28 September 2007, 26 September 2008 and 25 September 2009:
|
Financial year ended |
28 September 2007 € million |
26 September 2008 € million |
25 September 2009 € million |
|
Revenue |
196.3 |
250.3 |
217.2 |
|
Operating profit before interest and taxation |
13.0 |
23.9 |
20.5 |
Under the terms of the Disposal, upon completion €112.0 million will be payable to Greencore less a deduction for estimated net debt in the Business at completion of circa €5.0 million and a contribution of €5.6 million (which will be used to fund the estimated pension deficit relating to active members of the Greencore Malt UK pension scheme). Additional deferred cash consideration of €1.25 million will be payable on the first anniversary of completion. Further cash consideration of up to €3.0 million may become payable by reference to the earnings performance of Pauls Malt and Global Malting Services in the year ending 24 September 2010. The cash consideration payable to Greencore on completion under the Disposal will be subject to adjustment, upward or downward, to reflect the estimated level of working capital in the Business on completion compared with the average level of working capital in the Business. A post completion statement will be prepared to account for actual levels of working capital, net debt and the pension deficit relating to active members of the UK pension scheme as at the completion date. Upon completion, the Group will be released from all of its obligations in relation to funding the working capital requirements of the Business, including any amounts outstanding under trading arrangements related to the purchase of barley stocks.
Certain of the Group's property assets (circa 50 acres including lands at Athy, Co Kildare) which were formerly held within Minch Malt will not form part of the Business to be disposed. In addition, the Group will be entitled to retain insurance proceeds of €6.4 million, received in the current financial year, in respect of the estimated reconstruction costs arising out of an incident at Greencore Malt's malting facility at Ghlin, Belgium in 2008.
Liability in respect of the active members of the Greencore Malt UK pension scheme will transfer with the Business upon completion. Post completion, the Group will remain liable for the pension deficit related to the Greencore Malt Irish pension schemes and the pension deficit related to pensioner and deferred members of the Greencore Malt UK pension scheme. As at 25 September 2009, the pension deficit net of related deferred tax (on an IAS 19 basis) in respect of the Irish pension schemes and the UK pension scheme relating to pensioner and deferred members amounted to €9.9 million.
Net proceeds from the Disposal will be applied to reduce Group borrowings. The directors of Greencore (the "Directors") believe that this material reduction in Group borrowings, a reduction of approximately 32% by reference to the Group's comparable net debt position of €283.8 million at 25 September 2009, will provide the Group with additional balance sheet strength. This will enhance the Group's financial capacity to pursue future growth opportunities in line with its strategy in the UK and US convenience foods sectors.
As at 25 September 2009, Greencore Malt had gross assets of €144.7 million. The Disposal will give rise to a profit on disposal of approximately €20 million which will be included in Greencore's results for the year ending 24 September 2010. Following the Disposal, the Group will no longer benefit from operating profits generated by the Business. The Directors expect that the Disposal in isolation would be earnings dilutive for the Group, before the impact of the exceptional gain on the transaction or potential earnings progression in Convenience Foods, in the current financial year by approximately 2.4 cents per share (and in the year ending September 2011 by approximately 4.0 cents per share).
Completion of the Disposal is expected to occur in late March 2010, subject, inter alia to the approval of Greencore shareholders having been obtained. Greencore Malt operates primarily as a standalone business within Greencore and the Directors do not expect the Disposal to give rise to any material separation issues.
Commenting on the transaction Patrick Coveney, Chief Executive of the Group said:
"Today's transaction completes Greencore's journey into a focused convenience foods player, with clear leadership positions in the UK market and a growing regional presence in North America. While Greencore Malt has had a long and proud history, and been a significant contributor to Group earnings in recent years, it operates in a cyclical market now characterised by increasing levels of brewer and maltster consolidation. Having tested the market with several potential purchasers, we believe that the transaction announced today represents an excellent deal for Greencore shareholders, but also one that will provide enhanced opportunities for Greencore Malt's suppliers, customers and employees. Looking ahead, this deal will tighten our strategic focus, strengthen our balance sheet and provide capital to fund future growth over time in both our UK and US convenience foods markets."
Analyst and investor call
Greencore will hold a conference call for analysts and institutional investors today at 8.45am to discuss the Disposal. This call may be accessed on:
|
UK & USA |
+ 44 (0) 203 037 9148 |
|
Ireland |
+353 (0) 1 4360959 |
Replay will be available through a conference call replay facility which will be available for one week:
|
UK |
+ 44 (0) 208196 1998 |
|
Ireland |
+353 (0) 1 4864035 |
|
Access Code |
271009# |
A presentation will be available on: www.greencore.com/investor_relations
For further information, please contact:
|
Geoff Doherty |
Group Chief Financial Officer |
Tel: +353 (0) 1 605 1018 |
|
Imelda Hurley |
Head of Investor Relations |
Tel: +353 (0) 1 605 1039 |
|
Billy Murphy or Anne Marie Curran |
Drury Communications |
Tel: +353 (0) 1 260 5000 |
|
Elizabeth Rous or Rob Greening |
Powerscourt |
Tel: + 44 (0) 207 250 1446 |
Greencore Group
· A leading international producer of convenience food, as well as an established ingredients supplier with operations in Ireland, the UK, the US, The Netherlands and Belgium.
· Strong market leadership positions in the UK convenience food market across sandwiches, chilled prepared meals, chilled soups and sauces, ambient sauces & pickles, cakes & desserts and Yorkshire puddings.
· Extending presence outside the UK with fast-growing convenience food businesses in the US.
· An established ingredients supplier with leading market positions in Malt production for the brewing and distilling industries in Ireland, the UK and Belgium.
Axéréal
· A French cooperative formed in July 2009 through a merger of Agralys and Epis Centre.
· A leading player in the grain sector in Europe sourcing over 5 million tonnes of grain and selling over 8 million tonnes annually.
· Axéréal controls 73 per cent of Ariane which in turn owns 100 per cent of Boormalt, a large global maltster with annual production capacity of over 620,000 tonnes from its plants located in Belgium, France, Hungary and Croatia.
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This information is provided by RNS
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