SAVE GALTEE GROUP CONCEDES DEFEAT
- 'Breeo sale recipe for disaster' - consumer chief -
The Save Galtee Action Group (SGAG) has conceded defeat in its battle to restore the full production of famous food brands such as Dairygold and Galtee to Mitchelstown.
The group's decision to call it a day was made as Reox Holding plc announced an agreement for the sale of its Irish consumer foods business Breeo Foods to Kerry Foods for a price of â‚¬165 million. The sale, subject to Competition Authority approval, would see Kerry Foods take ownership of Breeo's portfolio of market leading consumer foods brands including Dairygold, Galtee, Shaws, Mitchelstown, Calvita, Roscrea and Sno.
SGAG was formed last June with Ned O'Keeffe TD as chairman following the announcement that the Galtee food production factory in Mitchelstown was to close.
"We are saddened at the news of this disposal which brings to a close a saga of mismanagement by chief executive Jerry Henchy, whose incompetence has led to this fire sale of what once was the outstanding consumer brand in Ireland", SGAG member Tony Lewis said this week.
Mr Lewis pointed the finger squarely at the shareholders for the massive job losses suffered by Mitchelstown in recent years.
"We were realists from the start", Mr Lewis continued, "We fought a good fight and looked towards the shareholders. They had the power to stop this process, which led to the economic ruin of Mitchelstown with the loss of between seven and eight hundred jobs. They obviously didn't listen and we are very disappointed with them. The company and jobs could have been saved by prudent positive management".
The Breeo Foods sale process was triggered by an unsolicited approach in October 2007 to buy the company's Irish branded foods business and it was stated by the company at the time that a disposal would only be considered if it offered good value for Reox shareholders.
"The deal represents a good return for Reox shareholders and is in the best interests of the Breeo Foods business. The successful rejuvenation of Breeo's business over the past few years has resulted in a good offer from the Kerry Group for our Irish consumer foods business. The value of the business as a bolt on to Kerry Foods is far greater to Kerry Group than the trading profit it would generate for Reox Holdings plc as a stand alone Irish consumer foods company going forward", commented Reox Holdings plc chief executive, Jerry Henchy.
"The Irish consumer foods marketplace is intensely competitive and exposed to sustained downward margin pressure. While the outlook is good for primary food producers, mid-sized consumer foods businesses like Breeo find themselves caught between the twin pressures of higher raw material costs and the increasing consolidation by the major supermarket multiples".
"Over the past five years we have fully investigated opportunities to grow the Breeo business through acquisition. However, unrealistic price expectations on the part of acquisition targets, coupled with embedded high property values in their business, convinced us that investing in food processing in Ireland or the UK would not yield a good long term return for our shareholders' capital".
"In the past few years we have transformed Breeo Ireland's business model into a highly innovative and cost efficient business. This model saw the outsourcing of much of the manufacturing activities and a redirection of spend into marketing and new product development while simultaneously growing business value and profitability", said Mr Henchy.
Looking to the future for Reox Holdings plc, Mr Henchy said that the focus would firmly remain on building shareholder value.
"Reox Holdings plc was established to create and deliver value to its shareholders and that will remain our driving force for the future", he said.
"Over the past two years our Alchemy Properties division has succeeded in unlocking the value of a significant proportion of our property portfolio. This work will continue and we anticipate being in a position to move ahead with a number of highly significant developments such as the new Mallow town centre scheme as soon as a final grant of planning permission has been confirmed.
"The sale of Breeo Foods will make additional capital available to support the Alchemy Properties, 4Home and Breeo Holland businesses as we drive aggressively ahead to grow shareholder value."
Mr Henchy concluded by stating that Reox Holdings plc would continue to pursue market opportunities in whatever sector they arise.
"Reox was established as a holding company to deliver real returns for shareholders from a portfolio of diverse businesses. We have succeeded in that mission to date and we will continue to do so, constantly seeking out and working new value adding business opportunities. The sale of Breeo Foods simply marks the beginning of an exciting new chapter for the business".
Mr Lewis, however, is sceptical of Mr Henchy's claim that the sale represents value for money for the shareholders.
"I think that to assess the true value of the sale to shareholders it is important to remember the huge costs in paying redundancies following the outsourcing of production from Mitchelstown," Mr Lewis argued, "We believe that thirty or forty million euro was spent on these redundancies at a cost to the shareholders and so to asses the net value of the sale I think you can subtract this sum from the figure paid".
Mr Lewis concluded by also questioning the value of the sale to Reox Holdings considering that the group's remaining companies 4Home and Alchemy Properties are based in construction and property when, compared to the stagnant property market, there is an upward trend in the value of food business sector.
"To dabble in the property market now is ridiculous," Mr Lewis suggested, "and it is crazy to battle through the hard times in the sector only to sell out when the curve starts to go up for the food market".
Meanwhile, the chief executive of the Consumers Association of Ireland, Dermot Jewell has described the deal, which will give Kerry Foods dominance in a number of product categories, as a 'recipe for disaster'. He says that having so many brands owned by one group 'creates the illusion of competition'.
Kerry Foods say that they are happy to leave the matter to the Competition Authority. A spokesperson for Reox refused to comment on the possible implications for clerical staff and van sales personnel employed by Breeo Foods. Staff employed locally have been apparently told that nothing will happen for the next 'six to eight months'.
However, it seems clear that the disposal will, in time, have an adverse affect for those employed in Mitchelstown as well as sales staff in the field.
Friday 21st March 9:14am