Reacting to news of the proposed €430m sale of the French spreads business - top brand St Hubert, others include Cholegram and Le Fleurier in France and Vallé in Italy - analysts Damien McNeela and Graham Jones from Panmure Gordon said in a note that the price was a "good result, albeit just outside the bottom end of our £350m to £400m valuation range. As a reminder St Hubert was acquired in January 2007 for circa. £248m".
Provided the transaction went through, Dairy Crest said it would remain a broadly based dairy business "entirely focused on the UK with strong brands including Cathedral City, Country Life, Clover and Frijj," that intended to continue to build on the success of its UK branded foods business and restore its dairies business to a satisfactory level of profitability in the medium term.
Replicate St Hubert success in UK
CEO Mark Allen said: "We are delighted to have agreed in principle the proposed disposal of St Hubert, at a price which reflects the excellent progress the business has made under our ownership.
"Over the coming months, with a strengthened balance sheet, we will be able to consider a wide range of opportunities including synergistic acquisitions in the UK. This will allow us to employ the same brand-building skills that have contributed to the strong growth of our UK brands and St Hubert's success. However, we will only do this within strict financial criteria and where an acquisition would add value for shareholders."
Dairy Crest announced on March 9 that French spreads were subject to a strategic review, and said today that it had considered a range of options for the business, but strong interest from a number of purchasers meant it decided upon a disposal.
Since acquiring the St Hubert business, Dairy Crest had grown its revenue and EBIT by 35% and 45% respectively, the firm said, but said it had been unable to make synergistic acquisitions in continental Europe that it had hoped would follow at the time of the acquisition.
In the year ending March 31 2012, St Hubert had a turnover of €130m and an EBITDA of €48.1m, while its gross assets totalled €169mm. The business is the number two player in market share value terms within French spread (39% as of March 2012) and the number one player in Italy (62%).
The business is headquartered in Rungis and has a dedicated manufacturing facility in Ludres that produced 35,000 tonnes of spreads in 2012; Dairy Crest said the current St Hubert management team led by CEO Patrick Cahuzac would remain with the business.
Cahuzac said of the deal: "We have found in Montagu a seasoned and ambitious European partner whose investment philosophy and pan-European presence will allow us to accelerate our development strategy."
'Ambitious innovation strategy'
The deal is subject to approval from Dairy Crest shareholders, clearance from French competition authorities and consultation with the French Works Council, after which the dairy processor envisages a conditional sale to Brassica Acquisition SAS, Montagu Private Equity's acquisitional vehicle.
Dairy Crest will then convene a general meeting of shareholders to secure approval for the sale, which it expects to complete by September 30; its exclusivity deal with Montagu in respect of the transaction expires on the same date.
Sylvain Berger-Duquene, director of Montagu Private Equity, said: "St Hubert fulfils all of Montagu's investment criteria. It is a market leader, with a steady organic growth record, fuelled by an ambitious innovation strategy and led by an outstanding management team.
"We look forward to investing in the business and supporting Patrick Cahuzac and his team in their development plans for St Hubert, including via acquisitions, both in France and abroad."