Dairy Crest to expand after St Hubert sale

Experts said they were surprised at the announcement but confirmed that a sale could result in further acquisitions by the firm, provided a buyer was found for St Hubert.

Damian McNeela, an analyst at Panmure Gordon, said: “Dairy Crest has this morning (March 9) announced a surprise strategic review of its French Branded Spreads business. Since the acquisition of the St. Hubert brand in 2007 the company hasn’t been able to make further acquisitions to generate synergies in its European business.​

“Provided a buyer is found, which is likely in our view, Dairy Crest hopes to use the proceeds to make further potential acquisitions in the UK branded dairy/chilled category.”​

Further acquisitions​

McNeela said he expected a buyer to be found but expressed concern as to whether any further acquisitions from Dairy Crest would reap the same benefits as the St Hubert business.

“Given that the French Spreads division is the most profitable part of the business, and represents 30% of group earnings before interest, tax and amortisation, our concerns are over whether any acquisition would deliver the same level of profitability​,” he added.

“We estimate a valuation range of £410M to £416M for St Hubert. We also understand that previously a number of players have expressed an interest in the business and we would hope for a reasonably quick sales process, somewhere in the region of three to six months.”​

Dairy Crest said generating greater shareholder value was a key reason behind the review. It also revealed that a sale would allow the firm to invest in its core business and potentially make strategic acquisitions of UK branded businesses.

Strong position​

“This would further improve Dairy Crest's strong position in the consolidating UK dairy market,”​ a statement from the firm revealed.

“Any acquisitions would be synergistic and made within strict financial criteria, as will any decision over the future of St Hubert​.”

The firm also said it would continue to develop its broadly based UK business, including its strong portfolio of brands such as Cathedral City cheese, Country Life, Clover and Frijj milkshakes.

Dairy Crest will issue its full-year trading update on March 29 and its preliminary results for the year ending March 31 2012 on MAy 24.