DCG Dairy Crest

RNS Number:5962G
Dairy Crest Group PLC
24 July 2006



24 July 2006

Dairy Crest Group plc ("Dairy Crest")

Acquisition of Express Dairies from Arla Foods UK plc

Dairy Crest today announces the proposed acquisition of Express Dairies Depot
Operations and Arla's Liverpool and Nottingham dairies ("Express Dairies") to
create the UK's leading doorstep and middle ground* business. The acquisition is
for a consideration of #33 million (subject to a working capital adjustment at
completion) and is expected to complete in August 2006 following a consultation
process with affected employees. The consideration will include a payment in
cash of #32.8 million which will be financed out of existing bank facilities.

Highlights of the transaction:

* The acquisition creates the UK's market leading doorstep and middle
  ground business with broad coverage across England and Wales and approximately
  two million customers;
* Significant synergies will be delivered which are anticipated to peak
  at around #9.0 million in 2008/09;
* The transaction is highly earnings accretive and will deliver returns
  on invested capital well ahead of the Group's weighted average cost of 
  capital;
* The assets acquired include a substantial property portfolio.

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 comprises 77 distribution depots, dairies in Liverpool and
Nottingham and has 1,850 employees. The business currently distributes
approximately 390 million litres (690 million pints) of milk per annum. As at 30
September 2005 the book value of gross assets being acquired was #51 million
(excluding goodwill), with net tangible assets of #26 million. In the year ended
30 September 2005 Express Dairies made operating profit before tax of #7.2
million on revenue of #229 million. 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.

Express Dairies will be integrated into Dairy Crest's existing operations as
soon as practicable. This will create the UK's market leading business servicing
the doorstep delivery and middle ground markets with broad coverage across
England and Wales.

This acquisition will generate significant synergies from a number of areas
including:

   *Achieving operational efficiencies: Dairy Crest has the industry leading
    business model for doorstep and middle ground, which has delivered good
    profits and cash in recent years. Using best practice from both companies'
    existing operations Dairy Crest is confident that it will drive further
    performance improvement from the combined business;
   *Integrating administration and depot overheads including a review of the
    two head offices.

These synergies, which are anticipated to peak at around #9.0 million in 2008/
09, together with the acquired profits are expected to benefit group adjusted
profit before tax (before exceptional costs) by around #2.0 million in the
current financial year and around #8.0 million in 2007/08. The costs associated
with the acquisition and integration are expected to result in exceptional cash
costs of approximately #7.0 million over the next eighteen months.

Transferring employees who are active members of either the Express Dairies, or
the Arla defined benefit pension schemes, will be invited to join the Dairy
Crest Group Pension Fund (a defined benefit scheme) from the date of transfer.
All other transferring employees will be invited to join the Dairy Crest
Stakeholder Pension Plan. Dairy Crest will not assume existing pension
liabilities for transferring employees as part of the transaction.

Dairy Crest is also announcing separately today that the Trustee of the Dairy
Crest Group Pension Fund has decided to reduce the allocation of pension fund
assets in equities from 69% to 60%. This change in investment allocation will
have no impact on profits or cash contributions in the current financial year.
However, under International Accounting Standard 19 it is expected that there
will be a negative accounting impact on Group profit before tax of approximately
#2.0 million per annum from 2007/08 onwards.


There will be a conference call for analysts today at 10.30am.
Dial in telephone number:              +44 (0) 1452 541077
Replay facility (until 31 July):       +44 (0) 1452 550000 access code 3282310#

For further information, please
contact:

Dairy Crest Group plc

Alastair Murray, Investors              01372 472379
Nicole Lander, Media                    01372 472574
Sinead Noble, Media                     01372 472249

Brunswick
Laura Cummings                          07974 982492

Notes to editors:

Dairy Crest focuses on building leadership positions in branded and added-value
markets across the dairy sector and investing in industry leading facilities to
create competitive advantage. Dairy Crest operates in two divisions: the Foods
division which includes spreads, cheese and fresh dairy products, (through our
Yoplait Dairy Crest joint venture) and Dairies which includes liquid products,
household and ingredients.

The company's portfolio of brands includes:

   *Cathedral City, the UK's biggest cheddar brand, together with the
    Davidstow and Wexford cheese brands which make Dairy Crest the leading
    supplier of mature cheddar in the UK.


   *Clover, the brand leader in the dairy spreads segment, together with
    Utterly Butterly, St Ivel Gold, Country Life, Vitalite and Willow. These
    brands give Dairy Crest a presence in every major sector of the UK spreads
    market.


   *St Ivel advance, a branded fresh milk with Omega 3


   *Frijj the brand leader in the fresh flavoured milk drinks market.


   *Dairy Crest is a leading supplier of fresh dairy products through the
    Yoplait Dairy Crest joint venture with its brands Petits Filous and Frubes,
    together with ranges including Wildlife and Weight Watchers.

* The middle ground is the industry term for a group of customers including
small and medium size retailers, wholesalers and other organisations such as
schools, hospitals and restaurants.



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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