Dairy Crest Regulatory News (DCG)

24 Jul 2006 07:01

Dairy Crest Group PLC24 July 2006 24 July 2006 Dairy Crest Group plc ("Dairy Crest") Acquisition of Express Dairies from Arla Foods UK plc Dairy Crest today announces the proposed acquisition of Express Dairies DepotOperations and Arla's Liverpool and Nottingham dairies ("Express Dairies") tocreate the UK's leading doorstep and middle ground* business. The acquisition isfor a consideration of £33 million (subject to a working capital adjustment atcompletion) and is expected to complete in August 2006 following a consultationprocess with affected employees. The consideration will include a payment incash of £32.8 million which will be financed out of existing bank facilities. Highlights of the transaction: • The acquisition creates the UK's market leading doorstep and middle ground business with broad coverage across England and Wales and approximately two million customers;• Significant synergies will be delivered which are anticipated to peak at around £9.0 million in 2008/09;• The transaction is highly earnings accretive and will deliver returns on invested capital well ahead of the Group's weighted average cost of capital;• The assets acquired include a substantial property portfolio. Drummond Hall, Chief Executive, Dairy Crest, said: "This deal creates the UK's leading doorstep and middle ground business. Theintegration of Express Dairies into our existing operations will generatesubstantial operational and financial synergies. Dairy Crest's management teamhas a long track record of successfully integrating acquisitions into its dairybusiness. This acquisition is consistent with our successful infill strategy for our dairybusiness and is at a price which will deliver significant value forshareholders." Express Dairies comprises 77 distribution depots, dairies in Liverpool andNottingham and has 1,850 employees. The business currently distributesapproximately 390 million litres (690 million pints) of milk per annum. As at 30September 2005 the book value of gross assets being acquired was £51 million(excluding goodwill), with net tangible assets of £26 million. In the year ended30 September 2005 Express Dairies made operating profit before tax of £7.2million on revenue of £229 million. Profitability for Express Dairies isexpected to be lower in the current financial year ending 30 September 2006reflecting the impact of the ongoing decline in the doorstep market. Express Dairies will be integrated into Dairy Crest's existing operations assoon as practicable. This will create the UK's market leading business servicingthe doorstep delivery and middle ground markets with broad coverage acrossEngland and Wales. This acquisition will generate significant synergies from a number of areasincluding: •Achieving operational efficiencies: Dairy Crest has the industry leading business model for doorstep and middle ground, which has delivered good profits and cash in recent years. Using best practice from both companies' existing operations Dairy Crest is confident that it will drive further performance improvement from the combined business; •Integrating administration and depot overheads including a review of the two head offices. These synergies, which are anticipated to peak at around £9.0 million in 2008/09, together with the acquired profits are expected to benefit group adjustedprofit before tax (before exceptional costs) by around £2.0 million in thecurrent financial year and around £8.0 million in 2007/08. The costs associatedwith the acquisition and integration are expected to result in exceptional cashcosts of approximately £7.0 million over the next eighteen months. Transferring employees who are active members of either the Express Dairies, orthe Arla defined benefit pension schemes, will be invited to join the DairyCrest Group Pension Fund (a defined benefit scheme) from the date of transfer.All other transferring employees will be invited to join the Dairy CrestStakeholder Pension Plan. Dairy Crest will not assume existing pensionliabilities for transferring employees as part of the transaction. Dairy Crest is also announcing separately today that the Trustee of the DairyCrest Group Pension Fund has decided to reduce the allocation of pension fundassets in equities from 69% to 60%. This change in investment allocation willhave no impact on profits or cash contributions in the current financial year.However, under International Accounting Standard 19 it is expected that therewill be a negative accounting impact on Group profit before tax of approximately£2.0 million per annum from 2007/08 onwards. There will be a conference call for analysts today at 10.30am.Dial in telephone number: +44 (0) 1452 541077Replay facility (until 31 July): +44 (0) 1452 550000 access code 3282310# For further information, pleasecontact: Dairy Crest Group plc Alastair Murray, Investors 01372 472379Nicole Lander, Media 01372 472574Sinead Noble, Media 01372 472249 BrunswickLaura Cummings 07974 982492 Notes to editors: Dairy Crest focuses on building leadership positions in branded and added-valuemarkets across the dairy sector and investing in industry leading facilities tocreate competitive advantage. Dairy Crest operates in two divisions: the Foodsdivision which includes spreads, cheese and fresh dairy products, (through ourYoplait Dairy Crest joint venture) and Dairies which includes liquid products,household and ingredients. The company's portfolio of brands includes: •Cathedral City, the UK's biggest cheddar brand, together with the Davidstow and Wexford cheese brands which make Dairy Crest the leading supplier of mature cheddar in the UK. •Clover, the brand leader in the dairy spreads segment, together with Utterly Butterly, St Ivel Gold, Country Life, Vitalite and Willow. These brands give Dairy Crest a presence in every major sector of the UK spreads market. •St Ivel advance, a branded fresh milk with Omega 3 •Frijj the brand leader in the fresh flavoured milk drinks market. •Dairy Crest is a leading supplier of fresh dairy products through the Yoplait Dairy Crest joint venture with its brands Petits Filous and Frubes, together with ranges including Wildlife and Weight Watchers. * The middle ground is the industry term for a group of customers includingsmall and medium size retailers, wholesalers and other organisations such asschools, hospitals and restaurants. This information is provided by RNS The company news service from the London Stock Exchange