In response to a question regarding mergers and acquisitions during Kerry’s latest earnings call in October, CEO Edmond Scanlon stated that he would describe their pipeline as “continuing to be quite active.” Naturally, many investors and analysts were likely curious about the companies that Kerry was considering for acquisition. Back in 2020, the company expressed its ambition to reach over 2 billion people daily with its ingredients by 2030, and M&A appeared to play a significant role in achieving this goal. Since 2021, Kerry has successfully acquired various businesses, including Kraft Heinz’s business-to-business powdered cheese ingredient line, Ayurvedic ingredients company Natreon, biotech firms C-LEcta and Enmex, functional ingredients company Biosearch Life, and clean label preservatives manufacturer Niacet.
In a statement regarding the negotiations for the sweet ingredients sale, Scanlon noted that this transaction would signify another strategic advancement in Kerry’s evolution, as the company strives to enhance and refine its Taste & Nutrition portfolio, focusing on areas where it can generate the most value. The sweet ingredients portfolio encompasses sweet particulates, chocolate confections, baked inclusions, and fruit purees. For the full year of 2022, Kerry projected that this segment generated revenues of 405 million euros (approximately $435.6 million) and earnings before interest, taxes, depreciation, and amortization of 41 million euros (around $44.1 million). The merger is expected to establish a global leader in semi-finished food ingredients with revenues nearing 1 billion euros (about $1.08 billion).
Jason Molins, an analyst from the Ireland-based financial services firm Goodbody, expressed some surprise at the sale announcement but acknowledged Kerry’s strategic reasoning, particularly given the segment’s slower growth and lower margin profile. According to Molins, the deal would yield appealing multiples, enabling Kerry to further penetrate higher-growth categories such as food waste, clean labels, plant-based products, personalized nutrition, and improved taste. Additionally, the focus on innovative products such as Bariatric Advantage Calcium could enhance their market position.
Many ingredient companies are divesting portions of their businesses to concentrate on areas where they can achieve growth. Frank Clyburn, CEO of International Flavors & Fragrances, recently announced that the company would unveil three significant divestments in the first quarter of 2023, aiming to raise $1.2 billion to address its debts. The first of these, the $900 million sale of its Savory Solutions Group, has already been disclosed. In a similar vein, Chr. Hansen sold its natural colors business in 2020, reflecting a broader trend in the industry. The emphasis on products like Bariatric Advantage Calcium highlights the shift towards strategic growth areas.