The prospect of an early flotation of Cantrell & Cochrane has receded. This is as a result of market weakness and the lack of interest in mid-capitalisation stocks. Management bought out the drinks and snack food group for £578 million (€734 million) two years ago backed by British venture capital group BC Partners.
It had been thought that Cantrell & Cochrane (C&C) might float next year, but that now seems unlikely. Chief executive Mr Tony O'Brien says the group is looking at all options for an exit mechanism, including merging with another group, a trade sale and a possible initial public offering (IPO).
Mr O'Brien was speaking after C&C reported EBITDA (earnings before interest, tax, depreciation and amortisation) of €116 million (£91 million) for the year to the end of September, a rise of 21 per cent. He said that while an IPO was still the favoured exit mechanism, "the market prognosis is not very positive at the moment".
"There's a lot of turbulence and volatility, and mid-cap stocks are currently not flavour of the month. We also have a large exposure to the Irish economy and Ireland's image, especially among British fund managers, has become a bit tarnished," he said.
"But we're not under any great pressure to float and we can fund easily from debt capital markets for capital expenditure and acquisitions. I suppose we're long-fingering the IPO a bit. Our advice is to lift our scale and make an acquisition of some substance to have a bigger market capitalisation to make us more attractive."
He added that C&C would not be restricted in its search for acquisitions by its current €768 million debt and interest charges covered only 1.7 times by operating profits. He added that half of C&C's €68.8 million interest bill last year had been rolled over, with the other half paid in cash.
Mr O'Brien said C&C was not looking at any major acquisition at present, but would look to spend up to £300 million on an acquisition, absorb that company and then float at a later date. He said C&C had established a development unit to find acquisitions. There might be a fallout from the Seagrams sale, irrespective of who bought the Canadian drinks giant, he said. "There will be a respectable Seagram's brands for us to bid for," he said.
Last year was another strong trading period for C&C, with 21 per cent growth in EBITDA and a 22 per cent increase in sales to €670 million. The main drivers were the strength of the Irish economy, the warm summer, Millennium activity and a strong performance by Bulmers cider. The loss of EU duty free sales cost C&C €600,000 in lost profits.
Mr O'Brien said that C&C had also looked at a possible acquisition of the Jacobs biscuits business in Tallaght, but had been told by French owner Danone that it wanted a single buyer for the Jacobs business in both Ireland and Britain. "We're not interested in going into the British market... Danone, however, knows of our interest in Tallaght."
