Dairy Crest yesterday (24 July) completed a GBP33m (US$61.08m) deal to acquire Express Dairies, Arla’s doorstep delivery business. The acquisition creates the UK’s market leading doorstep and middle ground business, with approximately 2m existing customers and coverage across England and Wales.

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The consideration includes a cash payment of GBP32.8m, which will be financed out of existing bank facilities, Dairy Crest said.  Assets acquired include a substantial property portfolio.


Dairy Crest described the transaction as “highly accretive”, suggesting that it will deliver returns on invested capital ahead of the group’s weighted average cost of capital.


The UK dairy company indicated that it saw significant synergies generating cost savings that are anticipated to peak at GBP9m in FY 2008/9.


Dairy Crest said that performance improvement measures would arise from the use of best practice from both companies’ existing operations. The company also identified cost savings associated with the integration of administration and depot overheads, including a review of both head offices.

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Drummond Hall, chief executive, Dairy Crest, said: “This deal creates the UK’s leading doorstep and middle ground business. The integration of Express Dairies into our existing operations will generate substantial operational and financial synergies. Dairy Crest’s management team has a long track record of successfully integrating acquisitions into its dairy business.


“This acquisition is consistent with our successful infill strategy for our dairy business and is at a price which will deliver significant value for shareholders.”


Express Dairies has 77 distribution depots, dairies in Liverpool and Nottingham and has 1,850 employees. As of 30 September 2005, the book value of gross assets being acquired was GBP51m, with tangible net assets of GBP26m. In the year ended 30 September 2005 Express Dairies made operating profit before tax of GBP7.2m on revenue of GBP229m. Profitability for Express Dairies is expected to be lower in the current financial year ending 30 September 2006 reflecting the impact of the ongoing decline in the doorstep market.


Following the announcement of the acquisition, Panmure Gordon upgraded Dairy Crest’s target price from 510 pence to 565 pence. The brokerage maintained its “buy” rating on shares.