Recent Deals Reveal Growing Appetite for Irish Food Companies - International Law Office

Barrys Buys Batchelors
C&C Group Completes Public Listing
Jacobs Back in Irish Hands
Comment

The recent announcement that French food and dairy company Groupe Danone has agreed to sell Irish Biscuits, best known for the Jacobs biscuit brand, to Irish company Fruitfield rounds off a period of significant change in the Irish food and beverage sector. Since the start of 2004, three of the leading names in the sector have undergone significant changes in their ownership structures, with the sales of Irish Biscuits and Batchelors and the flotation of the C&C Group. One interesting trend is that the businesses have largely returned to Irish ownership, with the exception of C&C, which has become a public company trading in Dublin and London. The three companies were formerly either majority or wholly-owned by non-Irish interests.

Barrys Buys Batchelors

At the start of the year, it was announced that Barrys Tea Group, one of Ireland's oldest and most successful food companies with a strong heritage and track record in brand development and customer service, had teamed up with Bank of Scotland (Ireland) to buy the Irish business of British food giant Northern Foods in a €95 million deal. The two main companies acquired were Batchelors and Beck Smith, which manufacture and distribute a range of food and drink products under brands such as Batchelors, Squeez, Amigo, Picnic and Lustre, as well as having distribution rights for a number of other brands. The acquisition vehicle, Maiden Acquisition Company, is owned 50/50 by the two partners. Anglo Irish Bank provided funding to the purchaser in the form of senior debt and mezzanine finance.

Batchelors is best known in Ireland for its tinned peas and bean products, and at the time of the transaction it employed 280 people in Dublin, Belfast and Athy, Co Kildare. In the year to March 2003, the acquired businesses (Batchelors and Beck Smith) generated a pre-tax profit of €7.9 million on a €76 million turnover. Barrys Tea was founded over 100 years ago and has expanded significantly from its Cork base over the past 20 years, becoming a national brand. It claims to account for 34% of all Irish tea sales in a market estimated to be worth in the region of €85 million. Barrys said that it had been seeking to invest in a complementary, well-established food business with potential for growth, and that Batchelors ideally suited this requirement.

C&C Group Completes Public Listing

Beverage and snack food company C&C Group Plc successfully completed its listing on the Irish and London Stock Exchanges in May of this year. C&C was formerly known as Cantrell & Cochrane and was established in 1968 when Allied Breweries and Guinness Ireland merged their Irish soft drink and cider interests. Allied Domecq acquired full control over the group in July 1998 when it purchased Guinness Ireland's interest, only to sell it on to management and venture capital group BC Partners in a leveraged buy-out the following year.

This was the company's third attempt to seek a listing. In 1998 C&C intended to float but dropped this plan due a period of market turmoil. A proposed listing in July 2002 was pulled in view of uncertainty and instability in the market in the wake of the technology bubble collapse. Plunging global equities markets caused by the prospect of an increase in US interest rates and rising oil prices threatened to derail this year's attempt, but while the début flotation price of €2.26 per share was at the bottom end of the €2.26 to €2.74 indicated range, the company expressed itself pleased with the response to the flotation in light of the prevailing weak stock market conditions. The shares have performed well since hitting the market and have remained well above the price at which they floated.

C&C is primarily a beverage group with a snack foods division. It is Ireland's leading cider manufacturer and shares the top market slot in soft drinks and snacks. More than 70% of its sales come from Ireland, with a further 18% from Britain and Northern Ireland. C&C beverage brands include Bulmers cider, Club soft drinks and Ballygowan mineral water. The company distributes a number of leading international brands in Ireland including 7-Up, Pepsi, Volvic and Evian. It also has within its stable products such as Carolans and Tullamore Dew. Its main snack food brand is Tayto potato crisps, one of Ireland's best-known and longest-established brands.

Jacobs Back in Irish Hands

French food and dairy company Groupe Danone recently announced the sale of its biscuit operation in Ireland, Irish Biscuits, which is best known as the manufacturer of Jacobs biscuit products. The purchaser is Irish company Fruitfield Foods Limited. W&R Jacobs Limited leads the Irish biscuit market with sales of around €70 million, and accounts for 35% of all biscuits bought in Ireland. Around €10 million of its sales are exports, mainly to the United Kingdom. Fruitfield is a privately owned food manufacturer which was formed in 2002 at the time of a management buy-in of the former business of Nestle Ireland.

Danone had previously announced that it had agreed to sell its UK and Irish biscuits operations to United Biscuits. However, regulatory and competition issues resulted in that deal being limited to the UK operations, and an agreement was subsequently reached to sell Irish Biscuits instead to Fruitfield, thereby avoiding potential competition issues, as although Fruitfield was an independent local business with experience in the food industry, it had no involvement in the biscuit market.

Irish Biscuits was formed in the 1960s from the merger of Jacobs and Bolands Biscuits. It employs more than 430 people and the newly combined business is expected to have annual turnover of in excess of €100 million. The deal creates one of the largest privately owned food companies in Ireland and returns Jacobs to Irish ownership, uniting a number of well-established domestic brands in the one stable. Fruitfield's preserves business includes Little Chip and Old Time Irish Marmalade, and its other divisions are responsible for Chef sauces, Silvermints and Scots Clan sweets. The brands include some of the strongest and most popular in the Irish grocery sector, providing a secure base for future development.

Comment

These transactions indicate that there is a healthy appetite among Irish purchasers for strong, well-established brands. It would be fair to describe brands such as Jacobs, Batchelors, Club and Tayto as household names in Ireland for many years, although they have achieved limited penetration into other markets, and indeed some of them have come under attack in the domestic market from other brands, both Irish and non-Irish, in the last few years. It would appear that the necessary funding is available to enable purchasers to continue to target established brands in the food sector, and it is likely that further deals will follow in the not too distant future.

For further information on this topic please contact Gerard Halpenny at LK Shields Solicitors by telephone (+353 1 661 0866) or by fax (+353 1 661 0883) or by email (ghalpenny@lkshields.ie).