ICI to Divest Food Ingredients

Taking action at its underperforming Quest International unit, ICI has agreed to sell Quest's food ingredients business to Kerry Group for $440 million.

The food ingredients unit employs some 900 people and had $255 million in sales last year of products such as emulsifiers, proteins, hydrocolloids, yeast, enzymes, and cultures.

Quest had overall sales last year of $1.1 billion, down 3% compared with 2002. The food ingredients business has been suffering as well, with fourth-quarter 2003 sales down 4% compared with the same period in 2002.

ICI says the planned divestiture follows a decision to focus efforts at Quest on restoring profitability in its core flavors and fragrances businesses. Once the food ingredients sale is complete, ICI says it will launch a $20 million restructuring at Quest in order to eliminate overhead.

By cutting jobs and issuing new stock, ICI has managed to stabilize its finances over the past two years. As a result, at the firm's 2003 earnings press conference last month, CEO John McAdam said the sale of entire businesses such as Quest was unlikely. Instead, ICI is focusing on "bolt off" sales like the food ingredients transaction.

For Ireland-based Kerry, the purchase will further expand a food ingredients business that has been growing steadily for the past three years with the help of numerous small acquisitions. Kerry CEO Hugh Friel notes that the Quest unit has a strong relationship with the pharmaceutical industry, supplying hydrolyzed proteins used in cell tissue culture and ingredients for pill tableting and therapeutic products.

ICI's sale will mark the second recent exit from food ingredients by a specialty chemicals company. Last month, Rhodia announced that it is negotiating to sell its $240 million-per-year food ingredients business to the Danish ingredients company Danisco (C&EN, Feb. 23, page 4).