Dairy Crest agrees in principle to sell St Hubert


Proposed disposal of its French branded spreads business, St Hubert SAS ("St Hubert")


Dairy Crest, the UK's leading dairy foods company, today announces that it has received a binding offer from Montagu Private Equity SAS regarding the proposed disposal of the entire issued share capital of St Hubert for a consideration of €430 million (£344 million) (1) payable in cash (the 'Transaction).

Background to and reasons for the Transaction

The Transaction follows Dairy Crest's announcement on 9 March 2012 of a strategic review of St Hubert. During the review a range of options were considered but as a result of substantial interest from a number of potential purchasers it was decided to pursue a divestment.
St Hubert was purchased in January 2007 for €370 million (approximately £248 million). Since its acquisition Dairy Crest has increased the revenue and EBIT for St Hubert by 35% and 45%, respectively.

St Hubert has been a successful part of the Dairy Crest group and has consistently increased its market share and profitability. However, Dairy Crest has been unable to make additional synergistic acquisitions in Continental Europe as it envisaged at the time of the acquisition and it believes that greater value may be generated for shareholders through the proposed disposal of St Hubert.

Information on St Hubert

St Hubert is a leading French producer of standard, low fat and innovative spreads. In the overall French spreads market, St Hubert is the second largest participant with a market share of approximately 39% by value as at March 2012. It has strong market positions in both the "Healthy" and "Classic" segments of the market and owns the market leading St Hubert Oméga 3 spreads brand, as well as the St Hubert 41, St Hubert 5 Céréales, St Hubert BIO, St Hubert Oméga 3 Spécialité Culinaire and Le Fleurier brands.

St Hubert is also present in Italy in the spreads and dough segments through its Valle' brand and holds a market share of approximately 62% by value in spreads as at March 2012. St Hubert is headquartered in Rungis and has a dedicated manufacturing facility in Ludres. The management team led by Patrick Cahuzac is remaining with the business.

For the year ended 31 March 2012, St Hubert generated EBITDA of €48.1 million (£41.52 million) (2) and EBIT of €46.1 million (£39.82 million) (2). The gross assets of St Hubert at 31 March 2012 were €169 million (£141 million) (3). This excludes assets recognised on consolidation and distributions by St Hubert to Dairy Crest since 31 March 2012.

Use of proceeds and financial effects of the Transaction on Dairy Crest

If the Transaction completes, the proceeds arising will initially be used to reduce net debt. To retain flexibility Dairy Crest has no immediate plans to repay any of its loan notes but will keep this under review.

Following the Transaction, Dairy Crest will remain a broadly based dairy business entirely focused on the UK with strong brands including Cathedral City, Country Life,

Clover and Frijj. It intends to continue to build on the success of its UK branded foods business and restore its Dairies business to a satisfactory level of profitability in the medium term.

Over the coming months, from a strengthened financial position, Dairy Crest will consider a range of options taking into account the interests of all stakeholders.

Completion of the Transaction

Any decision by Dairy Crest to proceed with the Transaction is subject to French Works Council consultation. In addition, completion of the Transaction is subject to the approval of Dairy Crest's shareholders, satisfactory clearance from the French competition authorities and financing consents.

Upon satisfactory completion of the French Works Council consultation process, Dairy Crest intends to enter into a conditional sale and purchase agreement with respect to the entire issued share capital of St Hubert with Brassica Acquisition SAS, a newly incorporated company established by funds advised by Montagu Private Equity SAS, and will dispatch a circular to its shareholders (the "Shareholder Circular") seeking their approval of the Transaction as the proposed disposal of St Hubert will constitute a Class 1 transaction for Dairy Crest pursuant to the Listing Rules. The Shareholder Circular will contain a notice convening a General Meeting of its shareholders. Dairy

Crest expects the Transaction to be completed before 30 September 2012 and has entered into an exclusivity agreement with Montagu Private Equity SAS in respect of the Transaction which expires on the same date.

Mark Allen, Chief Executive of Dairy Crest, said:

"We are delighted to have agreed in principle the proposed disposal of St Hubert, at a price which reflects the excellent progress the business has made under our ownership.
Over the coming months, with a strengthened balance sheet, we will be able to consider a wide range of opportunities including synergistic acquisitions in the UK. This will allow us to employ the same brand-building skills that have contributed to the strong growth of our UK brands and St Hubert's success. However, we will only do this within strict financial criteria and where an acquisition would add value for shareholders."

Dairy Crest will issue its Interim Management Statement for the first quarter on 17 July 2012.

1. Based on a 1.25 EUR/GBP exchange rate on 28 June 2012.
2. Based on a 1.16 EUR/GBP average exchange rate over the period from 1 April 2011 to 31 March 2012.
3. Based on a 1.20 EUR/GBP exchange rate as at 31 March 2012.

For further information, please contact:

Dairy Crest Group plc
Arthur Reeves 01372 472236

J.P. Morgan Cazenove
John Muncey 020 7742 4000
Dwayne Lysaght
James Mitford

Simon Sporborg 020 7404 5959
Sophie Brand

Notes to Editors

1. This announcement has been issued by, and is the sole responsibility of, Dairy Crest.

2. J.P. Morgan Limited, which conducts its UK investment banking activities as J.P. Morgan Cazenove, and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company and for no one else in connection with the Transaction and will not be responsible to anyone other than the Company for providing the protections afforded to customers of J.P. Morgan Cazenove or for providing advice in relation to the Transaction, the contents of this announcement or any other matter referred to herein.

3. No statement in this announcement is intended to constitute a profit forecast, nor should any statements be interpreted to mean that earnings or earnings per ordinary share will necessarily be greater or lesser than those for the relevant preceding financial periods of Dairy Crest. Rather, these statements should be construed as references to potential enhancements to the earnings that might otherwise have been earned during the relevant financial period.

In addition to the terms defined elsewhere in this announcement, the following definitions apply throughout this announcement unless the context requires otherwise:

"Board" or "Directors" the directors of Dairy Crest
"EBIT" earnings before interest and tax
"EBITDA" earnings before interest, tax, depreciation and amortisation
"General Meeting" the proposed General Meeting of the Company
"Listing Rules" the rules and regulations of the UK Listing Authority