First Milk snaps up First Milk cheese businesses

26-09-2006

Dairy Crest has revealed that it plans to sell the majority of its retailer brand cheese operations to First Milk in a deal worth £61.9 million.

In a statement the company said that the proposed sale was consistent with its strategy "to focus on building a branded and added value foods business and also with the industry trend for greater ownership of such assets by milk producers".

The deal, which is expected to be completed on October 14th, is dependent on the approval of First Milk shareholders.

The proposed sale includes Dairy Crest's cheddar creameries based at Haverfordwest, in Wales, in which First Milk already has a 20 per cent stake, at Aspatria, in Cumbria, and the company's pre-packing and whey processing facilities at Maelor, in Wrexham.

Dairy Crest said that the assets being sold had made an estimated operating profit of £3.4 million on sales of £194 million in the year to the end of March, when the business had a book value of £60.5 million.

Following the sale, Dairy Crest intends to focus its attentions on "accelerating the development" of its branded cheese products such as Cathedral City, currently the UK's biggest cheddar brand.

"This sale allows Dairy Crest to focus on accelerating the development of Cathedral City and its other cheese brands," said Dairy Crest chief executive Drummond Hall.

"The deal is expected to improve the return on capital employed in the cheese business. It will also improve the quality of the group's earnings overall, with an increased proportion of group sales coming from brands," he added.

In a separate trading update, Dairy Crest said today that the group had performed "solidly" in the six months to September 30th and that it expected its full results to be in line with expectations following "strong performances" from its Cathedral City and Country Life brands.


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