Manor Farm proceeds fund next generation
Vincent Carton on the €70m sale of Manor Farm
VINCENT and Justin Carton, who sold their Manor Farm chicken business in a deal worth up to €94m last week, are setting up a company to fund the business ambitions of the next generation of the family.
Manor Farm had been in the family for over 240 years but the two men, who held their interests in a vehicle called Carton Brothers, discovered some years ago that their eight daughters did not wish to continue in the chicken-processing business.
Stockholm-based Scandi Standard completed the acquisition of Manor Farm last week. The Cartons, who were advised by Merrion Corporate Finance, will get €34m in cash.
In addition they will own almost 10pc of Scandi Standard, a stake currently worth around €36m. An additional €24m could be earned if ambitious targets are met.
The brothers will not be shareholders in the new vehicle, Carton Sister, which will use some of the deal proceeds to fund new business projects. Carton said two non-food projects were already in development.
Vincent’s five daughters will each own 10pc of the business, while Justin’s three daughters will have 16pc.
“We believe in investing in ourselves,” said Vincent.
New owners Scandi Standard are keen to develop local opportunites and learn from the Irish market, writes Business Editor Samantha McCaughren
ALTHOUGH Vincent Carton and his brother Justin finalised the sale of the family business just last week, the most emotional moment came five years ago. Between them, the brothers have eight daughters. At a family sit-down, the brothers asked if any of the young women were interested in joining the company, the chicken processor Manor Farm.
“One thing we were adamant about was that no one was going to be forced,” said Vincent Carton. “The other was that no one would be let in until they had reached management level somewhere else.”
The response from the daughters was a resounding ‘No’, which brought some sadness but also some relief.
“That was quite liberating in a way for someone with eight generations of a family business on their shoulders,” said Carton late last week.
It meant the brothers were free to look at future options for the company, including the sale of the business, which was concluded in recent days.
Scandi Standard, a Nordic producer of chicken products, had been in the background for several years as a possible buyer and the deal took on some momentum around 12 months ago.
Under the deal, the Carton brothers will receive cash of €36m up front, although it is understood that after debt and transaction costs the net amount will be under €30m.
They also become the largest individual shareholders in Scandi Standard, a listed company, taking six million shares in the company, equivalent to just under 10pc of issued shares.
The deal — one of the biggest Irish deals of the year — is worth €70m in total and up to €94m if ambitious targets are met in the coming years.
Manor Farm’s history is closely intertwined with the history of Ireland’s poultry business. The company started in 1775 as a livery stable business, “minding the horses and carts of shopkeepers” coming into the Dublin market, explained Carton. “We noticed there wasn’t a poultry market, so we started one — we think around 1790.”
At the time, housewives kept hens to lay eggs all year round. At the end of its egg-laying life, the owners would kill these so-called ‘spent hens’, which would then be auctioned by the Carton. business.
While these older chickens needed to be boiled for hours, spring chickens, which we now eat, were later introduced into the Irish market. In the 1960s, a breakthrough in the use of hatcheries was made and spring chickens became available all year round.
“From the 1960s on, we started producing the chicken you’re eating now,” said Carton. “Our farmers, rather than producing in dozens, now produce in thousands.”
Carton’s father built the first commercial hatchery in Ireland in Carrickmacross, Co Monaghan in 1968. Two years later, the company opened Ireland’s first EU-approved chicken-processing plant.
In 1976, his father also built the company’s own food mill, which has stood to Manor Farm by allowing it to control the chicken feed which it supplies to its farmers.
For a time, Carton wasn’t sure if a life in Manor Farm was for him. He did a B Comm in UCD, graduating in 1979. The eldest boy in the family, he was expected to join the family business and duly obliged. “But within a week, I wanted to get out.” He thought the business old-fashioned and while it was strong on the production side, its back office processes needed to be overhauled.
Carton studied accounting at night, leaving the family firm in 1983 to join the Penn tennis balls company in Mullingar and later joining Zurich financial services in Dublin.
Manor Farm was at that stage owned by a fragmented shareholder base.
“You can imagine a seventh-generation family; cousins were now involved. And I got the opportunity, because of a death in the family, to buy a key shareholding from another branch of the family.”
At the same time, Justin Carton was given his father’s share in the company.
“We put the two together, created a holding company, Carton Brothers, and bought everybody else out. So now, after all those generations, we were back to two shareholders.”
It was 1988 and a good time to buy. Edwina Curry, then a junior health minister, had stood up in the British House of Commons to say that two-thirds of British eggs were infected with salmonella, so prices for chicken businesses were low. But with uncertainty abounding, it did involve risk.
Carton, who is part of the Family Business Network in Ireland, said that although he and his brother owned the company outright, their father remained as chief executive.
“I only became ceo 10 years later. Some asked me why? It’s because we loved him, we weren’t going to push him.
“Family businesses in Ireland don’t tend to talk about succession. My father simply refused to talk about succession, just didn’t want to know about it.”
His mother made them get around the table to discuss matters ahead of Carton’s transition to ceo in 1998.
“My dad made the assumption that once ‘the lads’ took over he wouldn’t be needed any more.”
The brothers were relieved that the reason for his resistance to succession was so simple. They made him chairman of the company, while he continued to work on his own projects within the business. He passed away five years ago.
Three years ago, the brothers decided to find a new owner for the business. “We were looking for a long-term viable future for the business,” said Carton.
They spoke with Scandi Standard at this stage, which tied up in an acquisition it had completed in Norway.
Last year, Carton was interested in a piece of technology in Holland, where he was advised that Scandi had invested in the same thing.
This reconnected Manor Farm and Scandi and a conversation about a deal was re-ignited, with the companies initially sharing information on technology, then financials and business details.
Scandi ceo Leif Bergvall Hansen made an offer for the company. Both companies spent some more time getting to know each other’s business, with Manor Farm advised by Merrion Corporate Finace throughout the process.
Carton was particularly surprised at how similar many aspects of their operations were. “The other thing that I respect enormously is that they value our business fairly, we felt. I don’t think we even argued about price. There was no issue.”
Scandi has a big focus on the local nature of the chicken business and it was keen to tie in local management.
“Scandi doesn’t parachute in management or anything like that.”
Carton will stay on as ceo of Manor Farm and join the board of Scandi, a plc.
The Cartons will have almost 10pc of Scandi and while they have a 12-month lock-in, they have told the Swedish company they have no plans to sell their stake.
The buyer itself has an Irish connection. Scandi Standard was formed by CapVest, the private-equity vehicle headed by Seamus Fitzpatrick, and other Scandavian partners including a Norweigan farming co-op. They bought three companies across Scandinavia, merging them four and-a-half years ago. Three years ago, it listed in Stockholm.
Ceo Leif Bergvall Hansen said that it now wanted to learn from its Irish acquisition as the Irish eat significantly more chicken than people in the Nordic countries. “There is a big catch-up potential,” he said last week.
The deal is Scandi Standard’s first acquisition outside of the Nordics and Hansen said he was drawn to the Irish business, which employs 850 people, because it is well run and in a strong position in Ireland.
The Irish market also appealed because of its size, which is similar to that of Nordic countries, he said.
“It was also important also for us to allow the family to continue in the business,” he added.
Among the opportunities which lie ahead is a growing demand from consumers to know more about the origins of their food. In supermarkets, people almost always opt for local chicken.
In the food-services business, much of the chicken is imported. Hansen expects that as food service businesses are required to give more information on the origins of their food, demand will grow for home-grown produce. This should open up new opportunities for Manor Farm.
As for the eight daughters in the Carton Family, a new company, Carton Sister, is being been formed for them.
The women all have impressive careers — among them are a corporate financier, an architect and several lawyers. Carton would like to foster their own business ambitions. “We’re going to help them finance their ideas,” he said.
So far, they have tried a protein snack business, but he said it had struggled to date.
However, there are a wide range of other business ideas in the pipeline. Two currently being developed are outside the food business.
“We would love to help them get going and make the ideas better,” he said.
“We believe in investing in ourselves. They might seem quite arrogant, but it’s true. We would like to continue that for the next generation and invest in their endeavours.”
Scandi valued our business fairly. I don’t think we even argued about the price — there was no issue