Dairy Crest to sell St Hubert spreads business

UK-based Dairy Crest has agreed to sell its French branded spreads business St Hubert to Montagu Private Equity in an all-cash deal of €430m, as part of a plan to strengthen its core UK dairy operations.

In March 2012, Dairy Crest initiated a strategic review of St Hubert, during which a range of options were assessed. After receiving interest from a number of potential purchasers, the company decided to divest the business.

Dairy Crest acquired St Hubert from Uniq in January 2007 for €370m, and since the acquisition, the revenue and EBIT of the spreads business rose by 35% and 45%, respectively.

However, increasing debt and failure to make additional acquisitions in Europe forced Dairy Crest to consider a strategic review of St Hubert.

Following the transaction, the company plans to reduce its net debt, which stood at £336m on 31 March 2012, and will focus on UK dairy operations by developing its portfolio of brands such as Cathedral City, Country Life, Clover and Frijj.

The company also plans to make strategic acquisitions of branded dairy businesses in the UK.

Dairy Crest chief executive Mark Allen said that with a strengthened balance sheet, the company will be able to consider a wide range of opportunities including acquisitions in the UK.

"However, we will only do this within strict financial criteria and where an acquisition would add value for shareholders," Allen added.

The deal is subject to the French Works Council consultation, the approval of Dairy Crest’s shareholders, and satisfactory clearance from the French competition authorities.