Kerry Group (KRZ) Investor Update summary

Transaction overview

• Agreement to sell Kerry Dairy Ireland for an enterprise value of €500 million, structured in two phases: 70% disposal for €350 million, followed by 30% for €150 million via call-put options up to July 2035.

• Consideration includes redemption of 15% of Co-Op's Kerry Group plc shares (~€251 million), a €56 million cash payment, and a €43 million loan agreement; Kerry's share capital will reduce by 2.9 million shares.

• A €50 million fund will be established to resolve disputes with milk suppliers, and Kerry Group plc will receive a fixed €7.5 million annual dividend during joint ownership.

• Seven manufacturing facilities and over 1,500 employees will transfer; Pat Murphy will remain CEO of Kerry Dairy Ireland.

• Transaction subject to shareholder and regulatory approvals, with completion of Phase 1 expected by end of January 2025.

Strategic rationale and impact

• The transaction transforms the group into a pure-play global B2B taste and nutrition company, enhancing portfolio clarity, capital allocation, and sustainability profile.

• Group volume growth is expected to increase by 30 basis points, EBITDA margin to rise by 140 basis points, and EPS dilution will be minimal at around 2%.

• Kerry Dairy Ireland reported FY2023 revenue of €1.3 billion and EBITDA of €53 million.

• The deal is expected to significantly reduce the Group's carbon footprint and improve free cash flow conversion.

• Kerry Dairy Ireland will become a vertically integrated Irish dairy leader, supporting local farmers and the dairy ecosystem.

Shareholding, governance, and structure

• 85% of Kerry Co-op's shareholding in Kerry Group plc will be directly owned by members, with the remaining 15% redeemed as part of the transaction.

• Co-op members' direct shareholding in the PLC will increase from about 20% to 30%, with no public placement of shares; transaction requires 75% PLC and 66% Co-op shareholder approval.

• Kerry and the Co-Op will enter a shareholders' agreement; Kerry Dairy Ireland's board will have 13 directors, majority from the Co-Op.

• Pat Murphy will remain CEO of Kerry Dairy Ireland, supported by the existing executive team.

• Phase 2 allows the Co-Op to acquire the remaining 30% for €150 million by 2035; Kerry can require purchase after 2030 if not exercised.