Kerry Group is likely to sell its Leckpatrick dairy interests in Northern Ireland following yesterday's sale of the Bailieboro dairy operation in Cavan to Lakeland Dairies for €33 million (£26 million).
While a Kerry spokesman would not comment on the future of the Leckpatrick business - which like Bailieboro was acquired last year as part of the Golden Vale takeover - it is understood that Kerry has received approaches from a number of parties and that a sale to a dairy group already active in the region is likely.
Any sale, however, will not include the St Brendan's cream liqueur business and a long-term supply arrangement for St Brendan's is likely to be part and parcel of a sale of Leckpatrick. Industry sources said it was difficult to put a value on Leckpatrick but one source suggested the price tag would not be greatly different than that for Bailieboro.
If Kerry does sell Leckpatrick, it will retain only the Golden Vale operations in the southern half of the island where there are greater synergies to be exploited.
Kerry paid €245 million for Golden Vale but assumed debt brought the total cost of the deal closer to €400 million.
Potential bidders for Leckpatrick would include Donegal Creameries, Town of Monaghan Co-op and Northern Ireland dairy companies such as Dromona, Fane Valley, UDF, Fermanagh Dairies and Strathroy Dairies, according to industry sources.
While the sale of Bailieboro is relatively insignificant for Kerry, it represents a major expansion for Lakeland and consolidates its position as the fourth largest dairy group behind Glanbia, Dairygold and Kerry. It will add about €100 million to the co-op's sales. Sales and profits for 2002 are now projected at €315 million and €6 million respectively.
The acquisition comes less than a year after former Heinz executive Mr Ed Prendergast took over as Lakeland chief executive.
Speaking to The Irish Times, Mr Prendergast described the acquisition as "a must-do deal for us. The synergies are obvious".
He said the Bailieboro plant in Cavan was one of the most efficient in the State and would help Lakeland realise its aim of moving its range of milk-powder products up the value chain.
Once the acquisition is complete, Bailieboro will concentrate on certain products while Lakeland's existing Killeshandra, Co Cavan plant will focus on other products.
"It guarantees that farmers will benefit from the retention of milk quota in the region rather than see it drain south over time, which would be the inevitable result of a failure to build the scale which has now been achieved by Lakeland," he said.
Lakeland's milk pool will increase from 60 million to 100 million gallons.
The co-op also draws 20 million gallons from producers north of the Border. Bailieboro milk suppliers will receive one Lakeland share for every four gallons of milk quota.
The significance of the acquisition to Lakeland is indicated by the change in the group's balance sheet.
At the start of the year, Lakeland had net cash of €10 million; after the Bailieboro acquisition it will have debt of €23 million. Mr Prendergast said interest charges would be covered more than four times and Lakeland would have ample provision for the future development of the business.
