Kerry to sell meats and meals business to Pilgrim's Pride for €819m

The meats business manufactures branded and private label meats, meat snacks, food-to-go and meat-free products. Its brands include Richmond, Denny, Galtee, Fridge Raiders and Rollover. The meals business primarily serves the UK market and specialises in authentic ethnic chilled and frozen ready meals, multi-cuisine ready to cook ranges, and home delivery meals under the Oakhouse brand.

Chief executive officer Edmond Scanlon said: "Kerry's strategy for the past 30 years has been to continuously evolve our portfolio, as we progressed on our journey to becoming a market-leading Taste & Nutrition company.

"This transaction further enhances Kerry's focus as a leading business to business ingredient solutions provider for the food, beverage and pharmaceutical markets. Pilgrim's is a global provider of high-quality food products and I am convinced they will make an excellent future owner of the meats and meals business."

Kerry said proceeds from the sale, which is expected to close in the final quarter of the year, will be used for general corporate purposes and the continued strategic development of the Taste & Nutrition business.

At 0820 BST, the shares were up 3.8% at €110.00.

Citi said in a note that Kerry's announcement of the sale is a significant positive strategic step and confirms long-time speculation around a decision to exit this non-core part of its portfolio.

"Although we estimate the deal would be circa 7% earnings per share dilutive, we expect it to trigger a rerating of the core Taste & Nutrition business to help close the (recently-widened) 27% FY2 price-to-earnings discount to specialty ingredients valuation, with current valuation levels attractive in our view.

"We estimate the deal will improve its core OSG and margin profile by circa 50 basis points and half net debt, providing firepower for future M&A. Overall, this confirms our positive stance on Kerry as it now crystallizes the value of its core, whilst near-term being well-placed to benefit from reopenings (via its Foodservice channel exposure) and little exposure to COGS (cost of goods sold) headwinds thanks to its pass-through pricing model."