Dairy Crest has received a binding offer for its French branded spread business St Hubert from Montagu Private Equity.
Montagu,one of the firms originally reported to have shown an interest in acquiring the firm,is offering a consideration of EUR430m(US$540.1m)in cash for St Hubert,which Dairy Crest purchased in 2007 for EUR370m.
If the sale goes ahead,Dairy Crest said the proceeds will initially be used to reduce net debt.
The company added that,following any 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.
"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,"said Dairy Crest chief executive Mark Allen.
"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.However,we will only do this within strict financial criteria and where an acquisition would add value for shareholders."
Any decision by Dairy Crest to proceed with the transaction is subject to French Works Council consultation.In addition,completion would be subject to the approval of the firm's shareholders,satisfactory clearance from the French competition authorities and financing consents.
The deal follows Dairy Crest's announcement in March of a strategic review of St Hubert.It said the potential sale of French spreads business St Hubert would reduce its debt but also help it to invest in its core operations in the UK,where it could acquire branded businesses.
Most analysts have applauded Dairy Crest's planned sale of St Hubert,which has reportedly received substantial interest from a number of potential purchasers,including private equity firms Cinven and PAI Partners.
