Dalgety ready to sell off its key assets

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Dalgety, the struggling Winalot and Felix petfoods business, is expected to put several of its key assets up for sale on Monday as part of an attempt to return value to long-suffering investors.

The company, which has issued two profits warnings in the last four months, is due to report the findings of its strategic review when it reports its full-year results on Monday. Analysts are expecting the company to announce news on some disposals which could include plans to sell all or part of two of its core businesses. The company would then be expected to undertake a share buy-back to prevent earnings dilution. Dalgety shares jumped 7.5p to 274p as the market warmed to the news.

"They certainly need to do something," one analyst said. "Management has been stretched by the problems in the petfoods business and the effects of BSE. A slimmed down Dalgety might be more able to get more of a grip on its problems."

The divisions that are expected to be sold are the food ingredients business which analysts say could be worth upwards of pounds 300m. The other candidate for sale is the Martin Brower food distribution in the United States which could fetch pounds 50m-pounds 60m. Analysts have suggested that Kerry Group, the Irish food compan, or Garry Weston's Associated British Foods would be interested in food ingredients. The management team may be interested in Martin Brower, which would attract a lower valuation as its sale would need to be sanctioned by McDonald's, the fast food giant which accounts for the lions share of the Martin Brower business.

The sale of all or parts of these two businesses would leave Dalgety focused on its petoods business, which includes Felix catfood and Winalot dogfood and its agribusiness, which includes the Pig Improvement company.

Analysts say the Dalgety rump would then be vulnerable to a bid from larger food groups keen to expand their interests in petfood. Possible bidders would include Ralston-Purina, Heinz and Nestle, which was the underbidder for Quaker's European petfoods operations bought by Dalgety two years ago.

It is thought that Richard Clothier, Dalgety's chief executive may quit following the sale of some assets. He has come under fire for the two profits warnings and a share price which has underperformed the market by 63 per cent in the last five years.

One analyst said: "I think he is there to see through a short-term job. If he did these deals and returned some value then he might do the honourable thing."

Dalgety is expected to report full-year results in line with its July warning on Monday. Analysts are expecting profits of pounds 65m.

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