Synergy in potential Dunbia/2 Sisters merger

Northern Ireland-based processor Dunbia could be close to a deal to merge with 2 Sisters. However, both companies are remaining tight-lipped.

French processor Bigard, the largest beef operation in Europe, has been among the processors rumoured to be interested in the family-owned business since expressions of interest were sought towards the end of last year.

However, it is now looking more likely that 2 Sisters may be the partners.

It is unclear at this stage just how the merger will play out, after it was initially thought that one of the Dobson brothers might want to exit the meat business. However, the latest suggestions are that both might remain involved, and that Dunbia will be responsible for red meat processing within the newly-merged business.

That would allow 2 Sisters to concentrate on managing their core business of poultry processing, along with their various food brands.

Owner of 2 Sisters Ranjit Singh Boparan built on a huge poultry business by adding a wide range of food brands, including Green Isle Foods and Donegal Catch.

In 2013, he acquired 11 UK sites operated by Vion, allowing 2 Sisters to expand its poultry operation and take it into red-meat processing with the St Merryn factories based in Wales and southwest England and the McIntosh Donald factory in Aberdeenshire, Scotland.

Industry sources claim the main difficulty facing 2 Sisters is sourcing suitable cattle, given they are heavily reliant on a catchment area in the mainly dairying heartland of England and Wales.

From the outside, therefore, a merger with redmeat processor Dunbia would offer a number of synergies, given that they also have a strong presence in Wales, with the largest sheep abattoir in the UK, abattoirs in the north of England and two sites in Scotland.

A tie-up between the two also significantly widens the potential customer base for both.

Last year, 2 Sisters made operating profits of £59m after sales of more than £3.1bn. But carrying a net debt of more than £687m (€552m), it is highly geared with a net debt-to-earnings ratio of almost four times.