Glanbia plc has entered into joint venture, worth almost £30 million, with the Leprino Foods Company in the US to expand further into the fast-growing European pizza cheese market.
Leprino, which is the world's largest cheese producer, concentrating solely on mozzarella cheese, is paying £27.5 million (€34.92 million) for a 49 per cent stake in Glanbia Cheese Ltd, which is the leading producer and marketer of pizza cheese in Europe.
The agreement, signed in Kilkenny yesterday, provides Glanbia with access to leading edge technologies, much-needed cash and a strategic partner in a very important market, according to the company. European demand for pizza cheese continues to grow at more than 8 per cent each year.
A net profit on the transaction after the write-back of related goodwill previously written off to reserves, and costs, is expected to be in the region of £15 million (€19 million) and will be treated as an exceptional item in the group's 2000 profit and loss account. The proceeds will be used for further investment in Glanbia Cheese Ltd and to reduce borrowings.
The company will be controlled jointly by Glanbia and Leprino and will operate the company's two cheese facilities, at Magheralin in Co Derry and Llangeffni in Wales, which between them employ around 300 people. Mr Paul Vernon will continue as chief executive of the business. Glanbia Cheese Ltd had a turnover last year of £90.16 million (€114.48 million) and a pre-tax profit of £4.81 million (€6.11 million).
Leprino has licensed exclusive use of its patented and proprietary mozzerella production technology in Europe to Glanbia. Glanbia believes that with this advanced technology, it can offer its European customers exciting innovations, accelerating its growth in market share.
It was the American company which approached Glanbia, group managing director, Mr Ned Sullivan, explained yesterday. "We had some discussions with them; the more we talked the more we saw the advantages of their technology, combined with our market share," he said.
" It's a very important development in the cheese strategy because we're the leading player in Europe and this combines our position with the leading technical player in the world. We will be investing part of the proceeds back into the business to expand output and growth," he said.
"Obtaining access to Leprino's proprietary technology in Europe opens new opportunities and the longer-term benefits of entering this joint venture significantly outweigh a go-it-alone approach in terms of customer offering, technology, market share profitability and resources for future development," he added.
Mr Sullivan said that Glanbia had a presence in many European markets. The joint venture covers central and eastern Europe, as well as Turkey.
He said Leprino, which is a privately-held company based in Denver, Colorado, "is recognised as having the best technology in terms of product development and functionality and overall ability to develop new product".
Mr James Leprino, chairman of the board of the Leprino Foods Company, said they were delighted to forge this alliance with Glanbia. Their leading position in Europe mirrored Leprino's position in the US. "Taking a position in the European market has been a logical next step for Leprino for some time and this joint venture with the market leader will, I believe, offer significant mutual benefits," he said.
Glanbia's corporate strategy is to focus future development in the international cheese and nutrition areas. This is the second major development in the cheese area this year; earlier Glanbia announced a $35 million investment in its US cheese operation, which produces cheddar-type cheese for the US market.
Glanbia's share price closed up 1 cent at 64 cents, following yesterday's announcement.
