April 21, 2009


Cranswick to sell pet business, focus on pork production


UK food firm Cranswick announced it had agreed to sell its pet business for GBP17 million (US$24.78 million) and focus on its food production business, primarily pork.


Cranswick chairman Martin Davey said the company would concentrate on growing the food business which includes gourmet sausages, traditional dry cured bacon, cooked meats and sandwiches organically and through acquisition following the sale.


The cash from the two businesses will be used to pay down group debt ahead of its GBP17.2 million acquisition of pork producer Bowes of Norfolk, made on April 6.


The pet division generated revenues of GBP40 million in 2008, which was around 7 percent of the group's total. The sale price is GBP17 million on a cash and debt-free basis and the company will keep a 5.5 percent stake in the business.


Analysts have calculated that the disposal will dilute earnings by around 3 percent, with interest savings from the deal being just under GBP1 million, compared with GBP2.2 million of profit that the business was expected to generate in 2009.


The initial acquisition was good because Bowes' business has more than 50 percent of sales in Tesco, a supermarket in which Cranswick less of a presence compared with other producers had.


The sale of the non-core businesses also looks good. It has improved the company's debt position, leaving it able to make further strategic acquisitions should opportunities arise.


US$1 = GBP0.685 (Apr 21)