Half a dozen different bids may be on the table when the deadline for offers on Dalgety's flour milling and food ingredients businesses arrives today. Kerry Group, which has made no secret of its wish to acquire the Dalgety business, is seen as the front-runner but is likely to face competition from Associated British Foods, Greencore, a management buy-out group and possibly three separate venture capitalbacked bids.
Dalgety has given no indication of when it will decide on the successful bidder, but sources close to Kerry have indicated that no decision is likely before the second half of next month.
Kerry and the other bidders have spent the past two months carrying out a detailed due diligence on the Dalgety businesses, which, if bought as a single unit, are likely to cost around £350 million.
Dalgety has indicated that it wants to sell the flour and ingredients business together even though Kerry would have little interest in flour milling while the likes of Greencore would not be keen on becoming involved in the Lucas food ingredients business.
Buying the two as a single unit is complicated by the fact that food ingredients businesses are usually valued at a significantly higher profits multiple than flour milling. "Kerry won't pay an ingredients business for a flour business," said one source.
Because a business like Dalgety is unlikely to present itself again, industry sources have suggested that buying Dalgety is as important to Kerry as buying DCA was for the Irish group three years ago. Dalgety would fill a significant gap in Kerry's food ingredients business which is currently based in North America and continental Europe, with little presence in Britain where Dalgety is based.
Cash-rich Associated British Foods (ABF) is seen as the strongest competitor to Kerry, but its chairman, Mr Garry Weston, has made a virtue out of not paying over the odds for companies and may not be willing to pay the sort of money that Kerry might offer for a major strategic business.
Greencore has said before that it intends to concentrate its acquisition search on Britain, but industry sources believe that Greencore is more likely to concentrate its fire on Pauls Malt, the Harrison & Crosfield subsidiary that it is also for sale.
The combined Dalgety flour and ingredients businesses had sales of £350 million sterling and operating profits of £29.9 million sterling last year. The ingredients business is thought to have had sales of £185 million and operating profits of £17 million. If Kerry is successful, it is likely to involve a 5 per cent share placing, which would raise around £60 million, with the balance coming from debt. Kerry could, however, recoup a substantial amount of the outlay if it was able to sell on the flour business at an early date.
