Kerry sours on sweets, IRCA to purchase sweet ingredients portfolio

12-Jan-2023 - Last updated on 12-Jan-2023 at 06:19 GMT

The deal is IRCA's third since it was acquired by private equity firm Advent International in July 2022. Image credit: Getty Images/Paper Boat Creative

In an effort to streamline its portfolio, ingredient manufacturer Kerry has entered into exclusive negotiations to sell its sweet ingredients business to food ingredient company IRCA for €500m ($538m).

Kerry’s sweet ingredients business, which includes baked inclusions, chocolate confections, fruit purees, variegates, and other sweet ingredients, serves the bakery, cereal, confections, dairy, and ice cream markets of the US and Europe, with four manufacturing facilities in the US and six in Europe.

The business unit accounted for an expected €405m, with an EBITDA of €41m, in 2022, said Kerry, which plans to use the proceeds of the sale to bolster its Taste & Nutrition business and for general corporate purposes.

“This transaction would represent another strategic development in Kerry's evolution, as we continue to look to enhance and refine our Taste & Nutrition portfolio, aligned to the areas where we can create the most value,” said Kerry CEO Edmond Scanlon.

IRCA, in turn, said the acquisition - its third since IRCA was acquired by private equity firm Advent International in July 2022 - would further its goal of becoming a global provider of semi-finished food ingredients, with an expected €1bn in annual revenues. Previously, IRCA acquired Italian pistachio ingredient company Anastasi Group and fruit-based ingredients company Cesarin Spa.

“This acquisition would represent a strong fit with our portfolio, with its highly complementary product and technological capabilities, and help us to become a truly global player. We look forward to helping the sweet ingredients portfolio realize its full potential as part of the IRCA family,” said IRCA CEO Massimo Garavaglia.

This deal - to be financed via an initial cash consideration of €375m and a €125m interest-bearing vendor loan note offer - is expected to close in the first half of 2023, subject to employee consultation and regulatory approval.

Kerry posted a 16.1% increase in revenues in Q3 2022, reflected higher pricing, with volume growth of 6.6%. Group EBITDA margin decreased by 40 basis points, primarily due to surging input cost inflation.