IMPORTANT NOTICE
THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE NON-U.S. PERSONS (AS DEFINED BELOW) LOCATED OUTSIDE OF THE UNITED STATES.
IMPORTANT: You must read the following before continuing. The following applies to the Offering Circular following this page (the "Offering Circular") and you are therefore advised to read this page carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from the Issuer (as defined in the Offering Circular), the Guarantor (as defined in the Offering Circular) or any of Coöperatieve Rabobank U.A. (Rabobank), HSBC Bank PLC, Merrill Lynch International and NatWest Markets N.V. (together, the "Joint Lead Managers"), or any co-lead manager specified in the Offering Circular (together the "Co-Lead Managers" and, together with the Joint Lead Managers, the "Managers") as a result of such access.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES (AS DEFINED IN THE OFFERING CIRCULAR) HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION, AND THE NOTES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT ("REGULATION S")) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE NOTES ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS.
THE ATTACHED OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER AND, IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON OR U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE NOTES DESCRIBED IN THE ATTACHED DOCUMENT.
Confirmation of your representation: In order to be eligible to view the attached Offering Circular or make an investment decision with respect to the Notes being offered, prospective investors must be non-U.S. persons (as defined in Regulation S) located outside the United States. This Offering Circular is being sent to you at your request, and by accessing this Offering Circular you shall be deemed to have represented to each of the Issuer, the Guarantor and the Managers that (1)(a) you are not a U.S. person and (b) you are purchasing the Notes being offered in an offshore transaction (within the meaning of Regulation S) and the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States, its territories and possessions, any State of the United States or the District of Columbia and (2) you consent to delivery of such Offering Circular by electronic transmission.
You are reminded that this Offering Circular has been delivered to you on the basis that you are a person into whose possession this Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this Offering Circular to any other person.
The materials relating to this offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer, and the Managers or any affiliate of the Managers is a licensed broker or dealer in the relevant jurisdiction, the offering shall be deemed to be made by the Managers or such affiliate on behalf of the Issuer in such jurisdiction.
The attached Offering Circular may only be distributed to, and is directed solely at (a) persons who have professional experience in matters relating to investments falling within article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (b) high net worth entities falling within article 49(2)(a) to (d) of the Order, and other persons to whom it may be lawfully communicated, falling within article 49(1) of the Order (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this document or any of its contents.
The attached Offering Circular has been sent to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Issuer, the Guarantor, the Managers, any person who controls them or any director, officer, employee or agent of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and any hard copy version.
KERRY GROUP FINANCIAL SERVICES (a public unlimited company incorporated under the laws of the Republic of Ireland)
EUR 750,000,000 0.625 per cent. Guaranteed Notes due 2029
guaranteed by KERRY GROUP PLC (a public limited company incorporated under the laws of the Republic of Ireland)
Issue Price: 98.991 per cent.
Application has been made to the Irish Stock Exchange plc trading as Euronext Dublin ("Euronext Dublin") for the approval of this Offering Circular as Listing Particulars ("Listing Particulars"). Such approval relates only to the EUR 750,000,000 0.625 per cent. Guaranteed Notes due 2029 (the "Notes") of Kerry Group Financial Services (the "Issuer") and guaranteed by Kerry Group plc (the "Guarantor"). Application has been made to Euronext Dublin for the Notes to be admitted to the Official List and trading on the Global Exchange Market which is the exchange regulated market of Euronext Dublin. The Global Exchange Market is not a regulated market for the purposes of Directive 2014/65/EU (as amended, "MiFID II"). Interest on the Notes is payable annually in arrear on 20 September in each year, commencing on 20 September 2020. Payments on the Notes will be made without deduction for or on account of taxes of the Republic of Ireland to the extent described under "Terms and Conditions of the Notes—Taxation". The Guarantor will unconditionally and irrevocably guarantee the due and punctual payment of all amounts at any time becoming due and payable in respect of the Notes. The Notes mature on 20 September 2029 but are subject to redemption in whole at their principal amount at the option of the Issuer at any time in the event of certain changes affecting taxation in the Republic of Ireland. In addition, the holder of a Note may, by the exercise of the relevant option, require the Issuer to redeem such Note at its principal amount in the circumstances described in Condition 5(c) (Redemption on Change of Control) herein. The terms and conditions also contain provisions to allow for the Issuer to exercise a call option as described in Condition 5(d) of the Issuer (Redemption at the Option of the Issuer (Issuer Maturity Par Call and Issuer Make-Whole Call)). The Notes will be offered and sold in offshore transactions outside the United States in reliance on Regulation S ("Regulation S") under the U.S. Securities Act of 1933, as amended (the "Securities Act"). NEITHER THE NOTES NOR THE GUARANTEE HAVE BEEN NOR WILL BE REGISTERED UNDER THE SECURITIES ACT, OR ANY STATE SECURITIES LAW, AND THE NOTES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON (AS SUCH TERMS ARE DEFINED IN REGULATION S), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE NOTES ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS. The Notes will be in registered form in denominations of EUR 100,000 and integral multiples of EUR 1,000 in excess thereof. The Notes may be held and transferred, and will be offered and sold, in the principal amount of EUR 100,000 and integral multiples of EUR 1,000 in excess thereof. The Notes will be represented by a Global Note Certificate which will be deposited with a common safekeeper for, and registered in the name of a nominee of, Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking, S.A. ("Clearstream, Luxembourg" and, together with Euroclear, the "ICSDs") on or around 20 September 2019 (the "Closing Date"). Individual note certificates evidencing holdings of Notes will only be available in certain limited circumstances. See "Summary of Provisions Relating to the Notes in Global Form". The Notes are expected to be rated Baa2 (Stable) and BBB+ (Stable) respectively by Moody's Investors Service Limited ("Moody's") and S&P Global Ratings Europe Limited ("S&P"). Each of Moody's and S&P is established in the European Economic Area and registered under Regulation (EU) No. 1060/2009, as amended (the "CRA Regulation") and appears on the latest update of the list of registered credit rating agencies on the European Securities and Markets Authority website http://www.esma.europe.eu. A security rating is not a recommendation to buy, sell or hold any Notes and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Investing in the Notes involves a high degree of risk. See "Risk Factors" beginning on page 11.
Joint Lead Managers
BofA Merrill Lynch HSBC
NatWest Markets Rabobank
Co-Lead Managers
AIB Barclays Bank of Ireland Group
BNP PARIBAS Citigroup Danske Bank
Davy Deutsche Bank Goldman Sachs International
J.P. Morgan Mizuho Securities
Offering Circular dated 18 September 2019
This Offering Circular does not constitute a prospectus for the purpose Regulation 2017/1129 (the "Prospectus Regulation"). The Issuer and the Guarantor accept responsibility for the information contained in this Offering Circular. To the best of the knowledge of the Issuer and the Guarantor, the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information.
This Offering Circular is to be read in conjunction with the financial statements which are deemed to be incorporated herein by reference (see "Incorporation by Reference" below).
In this Offering Circular, the term "Group" refers to the Guarantor and its consolidated subsidiaries taken as a whole.
None of Coöperatieve Rabobank U.A. (Rabobank), HSBC Bank PLC, Merrill Lynch International or NatWest Markets N.V. (together, the "Joint Lead Managers"), Allied Irish Banks p.l.c., Barclays Bank PLC, The Governor and Company of the Bank of Ireland, BNP Paribas, Citigroup Global Markets Limited, Danske Bank A/S, Deutsche Bank AG, London Branch, Goldman Sachs International, J&E Davy, J.P. Morgan Securities plc or Mizuho International plc (together the "Co-Lead Managers" and, together with the Joint Lead Managers, the "Managers") or any of their directors, affiliates, advisers or agents has made an independent verification of the information contained in this Offering Circular in connection with the issue or offering of the Notes and no representation or warranty, express or implied, is made by the Managers or any of their directors, affiliates, advisers or agents with respect to the accuracy or completeness of such information. Nothing contained in this Offering Circular is to be construed as, or shall be relied upon as, a promise, warranty or representation, whether to the past or the future, by the Managers or any of their respective directors, affiliates, advisers or agents in any respect. The contents of this Offering Circular are not, are not to be construed as, and should not be relied on as, legal, business or tax advice and each prospective investor should consult its own legal and other advisers for any such advice relevant to it.
No person is authorised to give any information or make any representation not contained in this Offering Circular in connection with the issue and offering of the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by any of the Issuer, the Guarantor, Deutsche Trustee Company Limited (the "Trustee") or the Managers or any of their directors, affiliates, advisers or agents. The delivery of this Offering Circular does not imply that there has been any change in the business and affairs of the Issuer or the Guarantor since the date hereof or that the information herein is correct as of any time subsequent to its date.
This Offering Circular does not constitute an offer to sell or a solicitation of an offer to buy the Notes by any person in any jurisdiction where it is unlawful to make such an offer or solicitation. The distribution of this Offering Circular and the offer or sale of the Notes in certain jurisdictions is restricted by law. This Offering Circular may not be used for, or in connection with, and does not constitute, any offer to, or solicitation by, anyone in any jurisdiction or under any circumstance in which such offer or solicitation is not authorised or is unlawful. In particular, the Notes have not been and will not be registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons. In particular, this Offering Circular does not constitute an offer of securities to the public in the United Kingdom. No prospectus has been or will be approved in the United Kingdom in respect of the Notes. Consequently this document is being distributed only to, and is directed at (a) persons who have professional experience in matters relating to investments falling within article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (b) high net worth entities falling within article 49(2)(a) to (d) of the Order, and other persons to whom it may be lawfully communicated, falling within article 49(1) of the Order (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this Offering Circular or any of its contents. Persons into whose possession this Offering Circular may come are required by the Issuer, the Guarantor and the Managers to inform themselves about and to observe such restrictions. Further information with regard to restrictions on offers, sales and deliveries of the Notes and the distribution of this Offering Circular and other offering material relating to the Notes is set out under "Subscription and Sale" and "Summary of Provisions Relating to the Notes in Global Form".
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Unless otherwise specified or the context so requires, references to a "Member State" are references to a Member State of the European Economic Area, references to "US$", "U.S. $", "U.S. dollars" or "dollars" are to United States dollars, and references to "euro", "EUR" and "€" are to the currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended.
MIFID II product governance / Professional investors and ECPs only target market – Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.
PRIIPs Regulation / Prohibition of sales to EEA retail investors – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive 2002/92/EC (as amended or superseded), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.
In connection with the issue of the Notes, Merrill Lynch International (the "Stabilisation Manager") (or person(s) acting on behalf of the Stabilisation Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilisation Manager (or person(s) acting on behalf of the Stabilisation Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation Manager (or person(s) acting on behalf of the Stabilisation Manager) in accordance with all applicable laws and rules.
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CONTENTS
Page
INCORPORATION BY REFERENCE ...... 4 FORWARD-LOOKING STATEMENTS ...... 5 PRESENTATION OF FINANCIAL INFORMATION ...... 6 OVERVIEW ...... 8 RISK FACTORS ...... 11 TERMS AND CONDITIONS OF THE NOTES ...... 26 SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ...... 42 USE OF PROCEEDS ...... 44 SELECTED CONSOLIDATED FINANCIAL INFORMATION ...... 45 BUSINESS DESCRIPTION ...... 51 MANAGEMENT OF THE GROUP ...... 69 SUBSTANTIAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ...... 77 TAXATION ...... 79 SUBSCRIPTION AND SALE ...... 84 GENERAL INFORMATION ...... 87
INCORPORATION BY REFERENCE
The audited consolidated financial statements (including the auditors' report thereon and notes thereto) of the Guarantor as at and in respect of the years ended 31 December 2018 (the "2018 Annual Report") and 31 December 2017 (set out on pages 132 to 202 and pages 116 to 186, respectively, of the 2018 and 2017 annual reports of the Guarantor) shall be deemed to be incorporated in, and to form part of, this Offering Circular.
The unaudited consolidated interim financial statements (including the notes thereto) of the Guarantor as at and in respect of the half year ended 30 June 2019 (set out on pages 6 to 26 of the 2019 interim management report of the Guarantor) shall be deemed to be incorporated in, and to form part of, this Offering Circular.
Copies of the documents specified above as containing information incorporated by reference in this Offering Circular may be inspected, free of charge, during usual business hours at the registered office of the Guarantor and the Specified Office of the Principal Paying Agent and also at www.kerrygroup.com. Any information contained in any of the documents specified above which is not incorporated by reference in this Offering Circular is either not relevant to investors or is covered elsewhere in this Offering Circular.
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FORWARD-LOOKING STATEMENTS
This Offering Circular contains various forward-looking statements that relate to, inter alia, events and trends that are subject to risks and uncertainties that could cause the actual business activities, results and financial position of the Issuer or the Guarantor to differ materially from the information presented herein. When used in this Offering Circular, the words "estimate", "project", "intend", "anticipate", "believe", "expect", "should" and similar expressions, as they relate to the Issuer and the Guarantor and their management, are intended to identify such forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Offering Circular. Neither the Issuer nor the Guarantor undertakes any obligations publicly to release the result of any revisions to these forward- looking statements to reflect the events or circumstances after the date of this Offering Circular or to reflect the occurrence of unanticipated events. When relying on forward-looking statements, investors should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which the Issuer and the Guarantor operate. Neither the Issuer nor the Guarantor makes any representation, warranty or prediction that the factors anticipated by such forward- looking statements will be present, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.
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PRESENTATION OF FINANCIAL INFORMATION
Presentation of the Group's Consolidated Financial Statements
This Offering Circular contains the consolidated financial information of the Group. The audited consolidated financial statements of the Group as of and for the years ended 31 December 2018 and 2017, which are incorporated in this Offering Circular by reference, have been prepared in accordance with the international financial reporting standards ("IFRS") as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2014 applicable to companies reporting under IFRS.
The Group's audited consolidated financial statements for each of the years ended 31 December 2018 and 2017, included in this Offering Circular have been audited by PricewaterhouseCoopers, One Spencer Dock, North Wall Quay, Dublin 1, Republic of Ireland, independent auditors of the Group, as stated in their reports appearing herein.
The Group's audited consolidated financial statements comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes, and incorporate the financial statements of the Guarantor and the Guarantor's Subsidiaries, all of which prepare financial statements up to 31 December of each year. Accounting policies of Subsidiaries are consistent with the policies adopted by the Group. Control is achieved where a company has the power over the investee, is exposed to or has rights to variable returns from its involvement with the investee and has the ability to use its power to affect its returns.
Certain consolidated financial information of the Group contained in this Offering Circular has been re- presented to reflect changes in the Group's reporting practices subsequent to the date such consolidated financial information was contained in the Group's audited consolidated financial statements as at and for a particular year. In particular:
• the audited consolidated financial statements contained in this Offering Circular are presented in euro, which is the functional currency of the Guarantor. The functional currencies of the Group's main Subsidiaries are the euro, the U.S. dollar and the pound sterling; and
• some financial information in this Offering Circular has been rounded and, as a result, the totals of the data presented in this Offering Circular may vary slightly from the actual arithmetic totals of such information.
Adoption of new accounting standards from 01 January 2019:
IFRS 16 - Leases
IFRS 16, published in January 2016, replaces the existing guidance in IAS 17 ‘Leases’. The Group have applied the standard from its mandatory adoption date of 1 January 2019 using the modified retrospective approach, under which the cumulative effect on initial application of €12.1m and a deferred tax asset of €2.7m was recognised in retained earnings at 1 January 2019. Right-of-use assets for property leases were measured on transition as if the new rules had always been applied. All other right-of-use assets were measured at the amount of the lease liability on adoption. As at 31 December 2018, the Group has non-cancellable operating lease commitments of €83.1m. Of these commitments, approximately €1.0m relate to short-term leases and €0.1m are low value leases which will be recognised on a straight-line basis as expense in profit or loss. The Group has recognised right-of-use assets of approximately €95.2m and lease liabilities of €107.3m on 1 January 2019, the transition date. The Group has also elected not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component further increasing the lease liability at 1 January 2019.
Definitions of Items Not Defined Under IFRS and Non-IFRS Measures
The Group's audited consolidated financial statements use the following financial statement items not defined under IFRS:
• Trading Profit refers to the operating profit generated by the businesses before intangible asset amortisation and gains or losses generated from non-trading items. Trading Profit represents operating profit before specific items that are considered to hinder comparison of the trading performance of the
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Group's businesses, either year-on-year or with other businesses. Trading profit margin refers to Group trading profit expressed as a percentage of Group revenue.
• Non-trading items refers to gains or losses on the disposal of businesses, disposal of assets (non-current assets and assets classified as held for sale), costs in preparation of disposal of assets, material acquisition transaction costs and material acquisition integration and restructuring costs. It is determined by management that each of these items relate to events or circumstances that are non- recurring in nature.
• Adjusted earnings refers to profit after taxation and attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax).
• Adjusted earnings on a constant currency basis refers to adjusted earnings impacted by retranslating prior year adjusted earnings at current year average exchange rates. Constant currency eliminates the translational effect that arises from changes in foreign currency year-on-year. It is determined by management that these items are excluded in order to assist in the understanding of underlying earnings.
• Adjusted (basic) earnings per share refers to adjusted earnings on a constant currency basis (as defined above) divided by the basic weighted average number of shares in issue.
The following non-IFRS measures are contained in this Offering Circular:
• Free cash flow refers to net cash from operating activities before expenditure on non-trading items and exchange translation adjustment less purchases of non-current assets plus proceeds from the sale of property, plant and equipment and capital grants received. Free cash flow is seen as an important indicator of the strength and quality of the business and of the availability to the Group of funds for reinvestment or for return to shareholders. Movement in average working capital is used when calculating free cash flow as management believes this provides a more accurate measure of the increase or decrease in working capital needed to support the business over the course of the year rather than at two distinct points in time. Movement in average working capital measures more accurately fluctuations caused by seasonality and other timing factors.
• EBITDA represents earnings before finance income and costs, income taxes, depreciation (net), intangible asset amortisation and non-trading items.
• Adjusted EBITDA refers to profit before taxation and attributable to owners of the relevant parent company before income taxes, finance income and costs, non-trading items, intangible asset amortisation, depreciation (net), with an adjustment to reflect management's estimate of the EBITDA of any acquisitions and disposals during the relevant period calculated as if such acquisitions or disposals had occurred on the first day of such period.
• Capital expenditure, which the Group defines as purchases of non-current assets, and net capital expenditure, which the Group defines as purchases of non-current assets less proceeds from the sale of property, plant and equipment and capital grants received.
• Dividend pay-out ratio, which the Group defines as the dividend per share divided by adjusted (basic) earnings per share.
The Group's management uses these measures as part of its overall assessment of the Group's consolidated and operating segment performance. These measures are not recognised terms or measures under IFRS. Accordingly, they should not be used in isolation of comparable IFRS metrics, as measures of operating performance, or of cash flow from operating activities. These measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the Group's results reported under IFRS. In particular, these measures should not be considered as an alternative to (a) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of the Group's operating performance, (b) cash flows from operating, investing and financing activities as a measure of the Group's ability to meet its cash needs or (c) any other measures of performance under generally accepted accounting principles. Because the Group's definitions of these measures may differ from those used by other companies and industries, presentation of these metrics may not be comparable to other similarly-titled measures used by other companies. See "Selected Consolidated Historical Financial Information" for a reconciliation of these measures to comparable IFRS measures for the periods presented therein.
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OVERVIEW
This overview must be read as an introduction to this Offering Circular and any decision to invest in the Notes should be based on a consideration of the Offering Circular as a whole. This overview does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by reference to the more detailed information in the rest of this Offering Circular.
Expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Offering Circular have the same meanings in this overview.
Overview of the Notes Issuer: Kerry Group Financial Services. Issuer's LEI: 635400SE9OHFJ8SLDG45 Joint Lead Managers and Co- Coöperatieve Rabobank U.A. (Rabobank), HSBC Bank PLC, Merrill Lead Managers: Lynch International and NatWest Markets N.V. Managers: The Joint Lead Managers and the Co-Lead Managers. Principal Paying Agent and Deutsche Bank AG, London Branch. Transfer Agent: Registrar: Deutsche Bank Luxembourg S.A. Trustee: Deutsche Trustee Company Limited. The Notes: EUR 750,000,000 0.625 per cent. Guaranteed Notes due 2029. Issue Price: 98.991 per cent. of the principal amount of the Notes. Issue Date: 20 September 2019. Maturity Date: 20 September 2029. Use of Proceeds: The Group intends to use the proceeds from the issuance of the Notes for general corporate purposes, including the repayment of indebtedness to, among others, certain of the Managers (see further "Description of Existing Financing arrangements") and the funding of acquisitions in the ordinary course of business.
Interest Rate: The Notes will bear interest at the rate of 0.625 per cent. per annum from and including 20 September 2019 to but excluding the Maturity Date (as defined in "Terms and Conditions of the Notes"). Status: The Notes constitute direct, general, senior, unsubordinated, unconditional and unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. Interest Payment Dates: Interest will be payable annually in arrear on 20 September in each year, commencing on 20 September 2020. Form and Denomination: The Notes will be issued in registered form in denominations of EUR100,000 and in integral multiples of EUR1,000 in excess thereof. The Notes will be represented by a Global Note Certificate which will be deposited with a common safekeeper for, and registered in the name of a nominee of, Clearstream, Luxembourg and Euroclear. Ownership interests in the Global Note Certificate will be shown on, and transfer thereof will be effected only through, records maintained by Clearstream, Luxembourg and Euroclear and their respective participants. See "Summary of Provisions Relating to the Notes whilst in Global Form".
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The Global Note Certificate is to be held under the New Safekeeping Structure, in a manner that would allow the Notes to be eligible as collateral for Eurosystem intra-day credit and monetary policy operations. Tax Redemption: Early redemption will be permitted for taxation reasons. See Condition 5(b) (Redemption for tax reasons). Redemption on Change of Noteholders will have the benefit of a put option in the event of a change Control: of control of the Issuer or Guarantor in the circumstances described in Condition 5(c) (Redemption on Change of Control). Redemption at the Option of The Issuer will have the benefit of a call option as described in Condition the Issuer (Issuer Maturity 5(d) (Redemption at the Option of the Issuer (Issuer Maturity Par Call Par Call and Issuer Make- and Issuer Make-Whole Call)). Whole Call): Negative Pledge: The Notes contain a negative pledge. See Condition 3 (Negative Pledge). Events of Default: See Condition 8 (Events of Default) of the "Terms and Conditions of the Notes". Substitution of the Issuer: The terms and conditions of the Notes contain provisions to allow for the substitution of the Issuer upon satisfaction of certain conditions and in accordance with the Trust Deed. See Condition 12(c) (Substitution). Taxation: All payments of principal and interest in respect of the Notes will be made free and clear of withholding taxes of the Republic of Ireland, unless the withholding is required by law. In that event, the Issuer will (subject to the exceptions in Condition 7 (Taxation)) pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding been required. Modification: The terms and conditions of the Notes contain a provision permitting the Notes and the terms and conditions of the Notes to be amended without the consent of the Noteholders, among other things, to correct a manifest error. Rating: The Notes are expected to be rated Baa2 (Stable) by Moody's and BBB+ (Stable) by S&P. In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating agency established in the EEA and registered under the CRA Regulation unless (1) the rating is provided by a credit rating agency not established in the EEA but is endorsed by a credit rating agency established in the EEA and registered under the CRA Regulation or (2) the rating is provided by a credit rating agency not established in the EEA which is certified under the CRA Regulation. Governing Law: The Notes will be governed by, and shall be construed in accordance with, English law. Listing and Clearing: Application has been made to Euronext Dublin for the approval of this Offering Circular as Listing Particulars. Application has been made to Euronext Dublin for the Notes to be admitted to the Official List and trading on the Global Exchange Market which is the exchange regulated market of Euronext Dublin. The Global Exchange Market is not a regulated market for the purposes of Directive 2014/65/EU. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg with the following ISIN, Common Code, CFI and FISN: ISIN: XS2042667944 Common Code: 204266794 CFI: DBFNFR
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FISN: KERRY GROUP FIN/.625EUR NT 20290920 Selling Restrictions: The offering and sale of Notes is subject to applicable laws and regulations including, without limitation, those of the United States, the United Kingdom, Singapore, Hong Kong, Japan and the Republic of Ireland. See "Subscription and Sale". Risk Factors: Investing in the Notes involves a high degree of risk. See "Risk Factors" beginning on page 11. Overview of the Guarantee Guarantor: Kerry Group plc. Guarantor's LEI: 635400TLVVBNXLFHWC59 Trustee: Deutsche Trustee Company Limited. Guarantee of the Notes: The Guarantor has in the Trust Deed unconditionally and irrevocably guaranteed the due and punctual payment of all sums from time to time payable by the Issuer in respect of the Notes. This guarantee (the "Guarantee of the Notes") constitutes direct, general, senior, unsubordinated, unconditional and unsecured obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured obligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. Governing Law: The Trust Deed, which contains the Guarantee, will be governed by, and shall be construed in accordance with, English law. Risk Factors: Investing in the Notes involves a high degree of risk. See "Risk Factors" beginning on page 11, which includes risks relating to the Guarantee ("If the Issuer or the Guarantor defaults, your right to receive payments under the Notes or the Guarantee may be adversely affected by Irish insolvency laws" and "The Guarantor's ability to pay amounts due under the Guarantee will depend on dividends and other payments received from Subsidiaries").
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RISK FACTORS
Prospective investors should be aware of the following risk factors in relation to the offering of the Notes. The Issuer and the Guarantor believe that the following risk factors may affect their ability to fulfil their obligations under the Notes. All of these risk factors are contingencies which may or may not occur and neither the Issuer nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring. Factors which the Issuer and the Guarantor believe may be material for the purpose of assessing the market risks associated with the Notes are also described below.
The Issuer and the Guarantor believe that the risk factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer or the Guarantor to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons and neither the Issuer nor the Guarantor represent that the statements below regarding the risks of holding any Notes are exhaustive. Additional risks, which are either not currently known or not considered likely to materialise, as at the date of this Offering Circular may also exist. Any of these risks could materially and adversely affect the Issuer's or the Guarantor's business, financial condition or results of operations.
Prospective investors should make their own independent evaluations of all risk factors and should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision.
The terms defined in "Terms and Conditions of the Notes" shall have the same meaning where used below.
Risks Relating to the Issuer
The Issuer is a wholly-owned subsidiary of the Guarantor. The Issuer's principal corporate purpose is the issuance of corporate debt and raising of finance generally. The proceeds of the issue of the Notes will be made available to members of the Group as described in "Use of Proceeds". Any payments, whether of principal or interest, under the Notes may be adversely affected if the Guarantor or Group Subsidiaries suffers from any of the risks set out in the section below. Therefore, the risks relating to the Issuer could be deemed to be the same as those relating to the Group, as set forth in the section below.
Risks Related to the Group's Business
The global geopolitical and macroeconomic environment brings uncertainty which could adversely impact the growth prospects of the Group.
As a global business operating across many jurisdictions, the Group is exposed to changes in the geopolitical or economic environment. Such changes include economic or political instability, increasingly complex legal and regulatory frameworks, currency volatility and varying regulatory standards of food quality and security. The Group may be adversely impacted by political, economic or social developments in any countries where it has production facilities, application facilities, sales operations or distribution networks. In general, the Group’s business is dependant on general economic conditions in its most important markets including Ireland, the United States, the United Kingdom and the European Union. The economy in any of these markets failing to recover as forecast, or a significant deterioration in economic conditions globally including inflationary pressures, disruption to credit or capital markets, social unrest and a reduction in consumer confidence and consumer spending could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group may be adversely impacted by Brexit, trade wars and changes in tariffs, duties or other trade restrictions
In June 2016, the UK held a referendum in which voters choose to exit from the European Union. The then UK prime minister invoked Article 50 of the Treaty of the European Union initiating this withdrawal process. This withdrawal is referred to as “Brexit”. The uncertain political environment and dissatisfaction with the terms of the withdrawal agreement in the UK has resulted in significant uncertainty around the terms and the timing of the withdrawal. The complete impact of the UK’s withdrawal from the European Union on the Group cannot be ascertained until the terms of the withdrawal are determined and the UK puts in place successor trading arrangements with other countries. The withdrawal process will continue to result in a sustained period of economic and political uncertainty in the UK and the withdrawal from the European Union could also have a negative impact on economic conditions in Europe. The Group has substantial business across both the UK and
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the European Union and the continued political and economic uncertainty could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The escalation of trade wars in some major global economies can have an impact on tariffs, duties or other barriers imposed on importers and exporters of goods between territories. As the Group operates in a number of countries, it imports and exports goods in most of these countries including but not limited to the United States, Mexico, Canada, the UK, the European Union, China and Malaysia. Developments and further escalations in these trade wars could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group business and operations may be negatively impacted by climate change and governmental action through legislation, regulation or other market measures to reduce climate changes
There is growing concern that climate change may adversely impact global temperatures, weather temperature and the severity and frequency of extreme natural disaster events. These changes may result in shortages of key resources such as water. They could also impact the production of key agricultural raw materials used by the Group including but not limited to dairy, cereals, sugar, oils (including palm oil), soya and flour. These raw materials could be subject to decreased availability or increased price. Government actions to reduce climate change by introducing green or carbon taxes and imposing other restrictions on manufacturing operations could significantly increase the cost of manufacturing the Groups products. In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs and may require the Group to make additional investments in facilities and equipment to comply with potential new regulations. The impact of climate change and governmental action to reduce climate change could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
Acquisitions may result in higher than expected integration costs or other adverse consequences.
Acquisitions are a key part of the Group's growth strategy. The Group has completed a significant number of acquisitions in recent years as part of its portfolio growth strategy and intends to make further acquisitions in the future, for example to increase the depth of its technology portfolio or expand its geographical reach or customer base. The Group regularly reviews potential opportunities. While the Group seeks to identify benefits, which may include anticipated cost savings, operating efficiencies and growth opportunities, prior to completing acquisitions, these benefits may not be achieved due to delays or other difficulties in completing the integration of acquired companies or assets, diversion of the attention and resources of the Group's management, higher than expected integration costs, inability to retain key resources in acquired companies or assumption of liabilities unrecognised in due diligence. This failure could arise due to an inaccurate evaluation of an acquisition or an overestimation of the anticipated synergies and cost savings potential of the acquisition.
In addition, the process of integrating acquired businesses may result in unforeseen operating difficulties and expenditures. Future acquisitions could also require the Group to issue equity securities or incur debt to finance such acquisitions, assume contingent liabilities or amortise expenses related to the intangible assets acquired.
The Group may not be able to find suitable acquisition targets, for example as a result of increasing competition for acquisitions due to consolidation in the taste and nutrition industry. Moreover, even if appropriate acquisition targets are identified, the Group may be unable to complete such acquisitions on favourable terms, if at all.
Any of these factors could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
Changes in the availability or price of raw materials, energy and other input costs could have a material adverse effect on the Group.
The Group uses many different raw materials, including flavours, proteins, functional ingredients such as emulsifiers, enzymes, cultures, hydrocolloids and colours, and commodities such as dairy, meat, flour, fruits, oils, soya, spices, starch and sugar. The Group also uses plastic, cardboard and paper to package its products and the production of its products requires material amounts of labour, freight and energy, including the consumption of natural gas, oil, coal and electricity.
The availability, quality and price of the raw materials, energy and other input costs used for the production of the Group's products can be affected by a number of factors beyond its control, including the level of agricultural production around the world, export demand, speculative movements in the ingredients or
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commodities markets, currency fluctuations, governmental regulations and legislation affecting agriculture, changes in taxation, trade agreements among producing and consuming nations, adverse weather conditions, natural disasters, political developments, various plant or animal diseases and pests. In addition, raw material, energy and other input prices generally correlate with trends in the overall macroeconomic environment.
The markets for certain ingredients and commodities, as well as energy, have in the past experienced and may in the future experience shortages and significant price fluctuations and the Group cannot predict with certainty the future availability or prices of the ingredients, commodities or energy required to produce its products. While the Group generally passes through changes in raw material prices through "back-to-back" arrangements with customers, it may not be able to do so on a timely basis without reducing its volumes, revenue and trading profit, if at all. Forward purchasing, derivative financial instruments and the terms of supply agreements can protect against increases in ingredient and commodity costs to some extent in the short term. However, since the Group generally does not enter into such arrangements on a long-term basis, they cannot provide complete protection over the medium or long term.
Any failure by the Group to adequately manage a reduction in the availability or an increase in the price of raw materials, energy and other input costs could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group may fail to identify consumer trends or respond to changing consumer tastes and preferences including changes in delivery systems of final product to consumers
The Group's growth and operating performance largely depend on its ability (and the ability of its customers) to successfully predict, identify, interpret and respond to consumer trends and changing consumer tastes and preferences, and to develop and offer products that appeal to these tastes and preferences or enable its customers to produce products that appeal to these tastes and preferences. Demand for consumer products that use the Group's taste and nutrition and for the Group's consumer foods has been influenced by changing social habits with respect to diet and food consumption. However, consumer tastes and preferences may change in unpredictable ways due to a variety of factors, many of which are outside the Group's control. Moreover, the challenging global economic environment and market fluctuations make it difficult for the Group to accurately forecast future product demand trends. The factors that may influence consumer tastes and preferences include changes in economic conditions, particularly in developing markets, changes in demographics, increasing awareness of consumer health and wellness issues, concerns about obesity, product attributes and ingredients, changes in travel, vacation or leisure activity patterns, weather and negative publicity resulting from regulatory action or litigation. The increasing awareness of health and wellness issues amongst consumers in developed countries has resulted in increased demand for more nutritious food.
In addition, even if the Group and its customers accurately identify such consumer trends, they may not be able to respond to them quickly enough, if at all. For example, although the Group spends a significant amount on research and development in its taste and nutrition business and has invested significant sums in its global and regional technology and application facilities, as well as on marketing and branding in its consumer foods business, it may not be successful in developing products that meet its customers' requirements or that can be delivered at an acceptable price. In addition, a lack of innovation in the industry generally could result in certain products becoming commoditised, which could reduce the price at which they could be sold, which could affect the Group's margins and increase competition.
A failure by the Group to anticipate, identify or respond adequately or quickly enough to changing consumer tastes and preferences in a timely manner or at all, or a failure to introduce new and improved products to satisfy these tastes and preferences or that enable its customers to satisfy these tastes and preferences, could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
Food contamination or other issues that result in product recalls or product liability claims could have a material adverse effect on the Group.
Selling products for human consumption involves inherent risks. In the past, the Group has occasionally decided or been required to, and, in the future, could decide or be required to, recall products due to suspected or confirmed product contamination, spoilage or other adulteration, an outbreak of animal disease, product misbranding or product tampering. Any of these events could have a material adverse effect on the Group's reputation, business, results of operations, financial condition and/or cash flows.
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The Group may also suffer losses if the Group's products or operations violate applicable laws or regulations, or if the Group's products cause injury, illness or death. In addition, the Group could face claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment or a related regulatory enforcement action against the Group could have a material adverse effect on the Group's reputation, business, results of operations, financial condition and/or cash flows. Moreover, even if a product liability or consumer claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against the Group's products or processes could have a material adverse effect on the Group's reputation, business, results of operations, financial condition and/or cash flows.
The Group may fail to maintain its brand image or the brand image of its consumer food products.
The Group is reliant on its brand image to market and sell its ingredients and flavour products. In addition, the Group's consumer food business depends on its ability to maintain and enhance the brand image and reputation of its existing products and develop and maintain a favourable image and reputation for new products. The image and reputation of the Group and the Group's products may be negatively affected in the future by several factors, such as concerns about product quality, even if unfounded. An event or series of events that materially damages the reputation of the Group or one or more of its brands could have an adverse effect on the Group or the value of that brand and revenue from that brand. Restoring the image and reputation of the Group and its products may be costly and difficult to achieve.
The Group seeks to maintain, extend and expand its brand image through marketing initiatives, including advertising and consumer promotions, and product innovation. Continuing global focus on health and wellness, including weight management, and increasing media attention to the role of food marketing could, however, lead to stricter regulations and greater scrutiny of food marketing practices, which could limit the Group's efforts to maintain, extend and expand its brands.
In addition, the Group's success in maintaining, extending and expanding the brand image of its products depends on its ability to adapt to a rapidly changing media environment, including the increasing reliance on social media and the online dissemination of advertising campaigns. The Group may be subject to certain legal and regulatory restrictions on how and to whom its products can be marketed, including with respect to marketing to children. These restrictions may limit the Group's ability to maintain, extend and expand its brand image as the media and communications environment continues to evolve.
If the Group is unsuccessful in maintaining, extending and expanding its brand image or the brand image of its products, this could have a material adverse effect on its business, results of operations, financial condition and/or cash flows.
The markets in which the Group operates are highly competitive.
Both the taste and nutrition market and the market for consumer foods, in which the Group competes, are highly competitive. The Group’s Taste & Nutrition operating segment competes with a variety of other international and local providers, many of which are taste and nutrition divisions of multinational companies, while its Consumer Foods operating segment competes with a number of specialist chilled foods providers and larger food and beverage manufacturers. The taste and nutrition industry is highly fragmented, with many different market participants, most of which concentrate on particular types of taste and nutritional products. As the Group offers a broad range of taste and nutritional products and solutions, it competes with different providers depending on the product in question. The consumer foods industry is also fragmented. However, the customer base of the industry is relatively consolidated, with consumer food providers being subject to pricing pressures from larger customers such as major supermarket chains.
The Group tends not to enter into long-term contracts, which leaves its customers free to switch to alternative suppliers with little or no notice. As a result, the Group's Taste & Nutrition business competes mainly on the basis of technology, product innovation and quality, global supply capability and customer relationships, while the Group's consumer foods business competes mainly on the basis of brand image, marketing, promotional activity, price and product innovation.
Increased competition in the Group's markets may divert consumers and customers from the Group's products. Competition in the Group's various markets and increased purchasing power of companies in its distribution channels could cause it to reduce the prices of its products, increase investment in innovation, increase marketing and other expenditures and prevent it from increasing prices to recover higher costs, which could result in lower margins or loss of market share. Some of the Group's competitors may have more effective
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pricing and greater financial resources to deploy. As a result, the Group's results may be adversely affected if it is unable to match the products and services offered by its competitors. Moreover, because the Group's consumer foods business relies on a limited number of brands across a limited number of markets for a substantial portion of its sales, any negative impact on the Group's brands because of competitive pressures could also lead to a decrease in the profitability of its consumer foods business. Any of the foregoing could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
In addition, if the Group's competitors were able to identify, develop and introduce on a commercial basis a major technological innovation that could substantially improve the efficiency of the production process and lower production costs or introduce a new or improved product, the Group may not be able to introduce a comparable innovation on a timely basis. Similarly, the Group must ensure that it at least matches or exceeds the service and quality performance offered by its competitors. If the Group fails to compete effectively with such innovation or service levels, this could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group's Kerryconnect initiative, could result in management distractions, operational disruptions or other difficulties.
The Group's Kerryconnect initiative involves the upgrading of the Group's information technology systems and the installation of new equipment and software. The Kerryconnect initiative was launched a number of years ago and is expected to be completed by 2021. The aim of this initiative is to integrate the Group's various information technology systems and create a common information technology platform, including a new enterprise resource planning system, for all companies in the Group. However, if the new equipment and software fail to operate as anticipated or the investment required to complete this initiative is greater than currently budgeted, this could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows. The integration of the Group's various information technology systems could also result in additional unexpected disruptions or shutdowns.
Cybercrime or information technology failures could disrupt the Group's operations.
There is a global threat of significant and increasingly sophisticated cyber-attacks including phishing, ransomware, malware and social engineering. These attacks may result in information technology systems being compromised, confidential data being accessed and/or theft of intellectual property or other assets.
The Group is increasingly reliant on a robust information technology infrastructure to process, transmit and store electronic and financial information, and to manage a variety of business processes and activities with respect to all companies in the Group. As with all large systems, the Group's information systems may be vulnerable to a variety of interruptions due to events beyond its control, including, but not limited to, natural disasters, terrorist attacks, hardware failures, cyber-crime and computer fraud risk. The Group depends on information technology to enable it to operate efficiently and interface with customers, as well as to maintain in-house management and control of its operations. If the Group fails to allocate, and effectively manage, the resources necessary to build and maintain an adequate and secure technology infrastructure, it could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, or the loss of or damage to intellectual property through security breaches or misappropriation of group assets including cash resources. If the Group's security measures are breached as a result of actions of a third party, this could result in unauthorised access to proprietary and confidential information, which could disrupt the Group's business processes and harm its reputation.
Any successful cybercrime attacks or other disruption to the Group's information technology systems could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group may be negatively affected by the impact of currency fluctuations.
The Group presents its audited consolidated financial statements in euro. However, many of the Group's companies are located outside the eurozone and recognise their revenue from operations and record assets and liabilities in currencies other than the euro. Consequently, the results and assets and liabilities of those Subsidiaries are translated into euro at applicable exchange rates (average exchange rates for consolidated income statement items and balance sheet date exchange rates for consolidated balance sheet items) when included in the Group's consolidated financial statements. The exchange rates between these currencies and the
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euro have fluctuated in the past and will continue to fluctuate in the future, and such volatility has an effect on the Group's Consolidated Income Statement and Consolidated Balance Sheet. Decreases in the value of the Subsidiaries' respective functional currencies against the euro reduce the value of those Subsidiaries' results and assets and liabilities in euro terms in the Group's audited consolidated financial statements. The Group's most important non-euro currencies are the U.S. dollar and the pound sterling, and fluctuations between these currencies and the euro therefore have the most significant impact on the Group's results of operations.
In addition to the currency translation risk, the Group incurs currency transaction risks whenever sales in one currency are not matched by costs incurred in the same currency. Such risk arises primarily with respect to sales in U.S. dollars or pounds sterling made by Subsidiaries that use the euro as their functional currency. Although the Group employs a variety of techniques to reduce the impact of currency transaction risk, such as using forward contracts to hedge its currency exposures, there can be no assurance that such measures will successfully hedge against the negative effects of such foreign exchange exposure, particularly over the long- term. In particular, concerns regarding the manner of the UK's exit from the EU may result in increased volatility of exchange rates and make it more difficult for the Group to successfully hedge the effects of its foreign exchange exposure.
Volatility in exchange rates may also increase the cost of the Group's products to customers operating in different currencies and impair the purchasing power of such customers or result in competitive advantages to certain of the Group's competitors who incur a material part of their costs in different currencies.
Any of the foregoing risks relating to currency fluctuations could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group is exposed to interest rate risks. Movements in interest rates may adversely affect the Group's debt service obligations.
The Group is exposed to the risk of fluctuations in interest rates under certain of its debt obligations. Although the Group enters into various derivative transactions with a view to managing exposure to movements in interest rates, there can be no assurance that the Group will be able to fully manage its exposure or to continue to do so at a reasonable cost. Any failure or inability to manage the Group's exposure to interest rate rises may increase the Group's borrowing costs and could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group's counterparties may fail to meet their payment obligations. Such failure could have a material adverse impact on the Group's business, operating results, financial condition or prospects.
The Group is exposed to counterparty credit risk in relation to deposits, derivatives and trade and other receivables. Some of our counterparties and debtors may be highly leveraged, not well capitalised and subject to their own operating, legal and regulatory risks and, even if the Group's credit review and analysis mechanisms work properly, the Group may experience financial losses in its dealings with such parties. A lack of liquidity in the capital markets or a downturn in the global economy may cause the Group's counterparties and debtors to increase the time they take to pay or to default on their payment obligations, or may otherwise negatively affect the Group's cash flow. In addition, weakness in the economy could cause some of the Group's counterparties or debtors to become illiquid or otherwise adversely affect the collection of their accounts, which could result in a higher level of bad debt expense, or insolvency as a result of the economic conditions in the countries relevant to their operations. Moreover, the risk that the Group's counterparties and debtors fail to meet their payment or other obligations on time, or at all, may increase if economic conditions deteriorate. If any of these risks materialise, the Group's business, operating results, financial condition or prospects may be materially adversely affected.
The Group may not have access to the funds required for future growth and expansion or refinancing needs.
The Group may need to raise additional funds for its future capital needs to grow and expand its operations or to refinance its current indebtedness. Although the Group expects to fund its capital expenditure from its operating cash flows to the extent possible, if such operating cash flows are insufficient to fund the Group's capital expenditure, it may have to either reduce its capital expenditure or raise additional funds through public or private financing from lenders or the financial markets, strategic relationships or other arrangements. However, there can be no assurance that the funding, if needed, will be available on attractive terms to the Group, or at all. Furthermore, any debt financing, if available, may contain restrictive terms and conditions including financial covenants.
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Compliance with these terms and conditions may restrict the Group's ability to incur further indebtedness in order to grow its business and otherwise restrict the Group's flexibility in pursuing its business strategy. In addition, if the Group fails to comply with these terms and conditions, its lenders would have the right to accelerate the maturity of that debt.
In addition, the Group's ability to obtain financing depends upon prevailing market conditions. If uncertain conditions prevail at a time the Group comes to the debt markets, it could have difficulty or be unable to obtain financing or refinance all or a substantial amount of its debt obligations when they become due. Further, a credit rating downgrade of the Group could have a material adverse effect on its ability to finance its ongoing operations or to refinance its existing indebtedness and result in the interest rate paid on drawdowns under its existing revolving credit facility to increase.
If the Group is unable to generate sufficient operating cash flows, or raise sufficient funds, or fails to comply with the terms and conditions of its borrowing arrangements, it may not be able to achieve its desired growth plans, which could have a material adverse effect on its business, results of operations, financial condition and/or cash flows.
The Group may not be able to protect its intellectual property rights or to successfully defend itself against allegations that it has infringed a third-party's intellectual property rights.
The Group's commercial success depends on its ability to successfully defend its intellectual property, including know-how, trade secrets, customer lists, manufacturing know-how and domain names, and to obtain intellectual property protection for its products, brands, processes and technologies where appropriate, including through the use of trademarks and patents. Many of the Group's taste and nutrition formulations are not patented, and the Group often relies on trade secrets to protect its proprietary formulations, as this does not require it to publicly file information regarding its intellectual property. If the Group is unsuccessful in maintaining the confidentiality of this information, for example through confidentiality and non-disclosure agreements with employees, suppliers and customers, third parties could use this information to produce their own versions of the Group's products and undermine the Group's competitive advantage.
The Group has also been granted trademark registrations and patents covering some of its brands and products in many of the jurisdictions in which it operates and has filed, and expects to continue to file, trademark and patent applications seeking to protect some newly developed brands and products in these and other jurisdictions. Where it does choose to make such applications, the Group cannot be sure that trademark and patent registrations will be issued. There is also a risk that it could, by omission, fail to renew a trademark or patent on a timely basis or that its competitors may challenge, invalidate or circumvent any existing or future trademarks and patents issued to, or licensed by, the Group. In addition, other companies may independently develop products or technologies similar to the Group's or independently duplicate the Group's products or technologies. The Group may also face allegations that it has infringed the intellectual property rights of a third party.
Although the Group believes it has taken appropriate measures to protect its portfolio of intellectual property rights (including its know-how and trade secrets), there can be no assurance that such measures will be sufficient or that third parties will not infringe upon or misappropriate its intellectual property. Moreover, some of the countries in which it operates offer less efficient intellectual property protection than is available in Europe or the United States.
Any failure by the Group to protect its intellectual property against infringement or misappropriation or to successfully defend itself against allegations that it has infringed the intellectual property rights of a third party could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group operates a multinational business and is subject to the economic, political and other risks inherent in operating in foreign countries, particularly in developing markets.
The Group has, for many years, operated in several foreign countries. As at the date of this Offering Circular, the Group has manufacturing facilities in 32 countries, sales offices in a further 12 countries and generates revenue in more than 140 countries. As such, its operations are subject to the economic, political and other risks inherent in operating in foreign countries, including differing tax rates and currency exchange rate fluctuations. In addition, the Group aims to strengthen its presence in certain developing markets, such as Latin America, the Middle East, Africa and Asia Pacific, and the Group's success will depend in part on its ability to pursue
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this strategy in an uncertain global geopolitical and/or economic environment. This strategy could expose the Group to certain risks related to operating in developing markets, including economic, social and political instability, high inflation, inadequate protection of creditors due to a lack of efficient bankruptcy procedures, investment restrictions, government action or intervention, such as expropriations, and fraudulent activity. The materialisation of any of these risks could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows, and could delay, prevent or jeopardise the implementation of the Group's developing markets strategy.
Non-compliance with and/or violations of applicable laws or regulations could lead to legal or regulatory sanctions, significant costs and reputational damage for the Group.
The manufacture and sale of the Group's products are subject to various regulatory requirements in each of the countries in which such products are produced and sold. In addition, the Group operates in a number of different countries and is therefore subject to a broad range of laws and regulations, including with respect to health, safety and the environment. Compliance with applicable laws or regulations, new or revised laws or regulations or changed interpretations or enforcement of existing laws or regulations may impose significant costs on the Group. In addition, any failure by the Group to comply with applicable laws and regulations could lead to legal or regulatory sanctions, including fines or penalties, as well as reputational damage, any of which could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group's operations are subject to environmental regulations, which could expose it to significant compliance costs and litigation relating to environmental matters and reputational damage for the Group.
The Group's production facilities and operations are subject to various environmental laws and regulations in each of the jurisdictions in which it operates. Among other things, these laws and regulations regulate the emission or discharge of materials into the environment and the use, management, treatment, storage and disposal of hazardous substances and wastes. The regulatory environment with respect to these environmental laws and regulations is generally becoming stricter, with a greater emphasis on enforcement. The Group could incur, or be subject to, among other things, substantial costs, third party damage claims (which can lead to reputational damage) or requirements to install additional safety controls in the event it violates any existing or future environmental requirements applicable to its production facilities and operations or fails to obtain applicable permits. In addition, the Group may incur costs or have to apply for revised or additional environmental permits if it expands its business.
While the Group has budgeted for future capital and operating expenditures to maintain compliance with environmental laws and regulations, there can be no assurance that the Group will not incur substantial environmental liability or that applicable environmental laws and regulations will not change or become more stringent in the future.
Any failure by the Group to comply with applicable environmental laws and regulations could lead to legal or regulatory sanctions, including fines or penalties, as well as reputational damage, any of which could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group's manufacturing facilities are subject to operational risks.
The Group has established manufacturing facilities in 32 countries in Europe, Africa, the Americas, the Middle East and Asia Pacific. The Group's manufacturing facilities are subject to operational risks, such as unanticipated shortages of materials or labour, technical difficulties and failures, industrial accidents, industrial disputes, labour disputes, political events, material changes in applicable law and regulations, local or political opposition, acts of terrorism, blockades or embargoes, litigation, adverse weather conditions, cost overruns, delays in delivery of materials, power interruptions, critical equipment failures, fire, explosions, floods, earthquakes or other accidents or acts of force majeure and other unforeseen contingencies.
Any of these events could have an adverse impact on the production activities of the Group and prevent the timely execution of orders received from the Group's customers, thus damaging its customer relationships, and may have a material adverse effect on the Group's reputation and, consequently, its business, results of operations, financial condition and/or cash flows.
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The Group's insurance coverage does not cover all of the potential losses, liabilities and damages related to the business in which the Group operates.
The operation of the Group's business involves numerous risks that could result in damage to manufacturing facilities, machinery break-downs, personal injury or death, environmental damage, or delays in the supply of raw materials, each of which could lead to monetary losses and possible legal liability. Although the Group has risk management policies and procedures in place and maintains insurance against certain of these risks, incidents of the type referred to above may nonetheless occur and the costs of such incidents may not be fully covered by insurance policies and/or may lead to higher insurance premiums for the Group in the future. There can be no assurance that the insurance coverage that the Group has obtained will adequately compensate for actual losses suffered, nor can there be any assurance that the Group's existing insurance policies will continue to be available on commercially reasonable terms, or at all. In addition, it is not possible to obtain insurance against all risks and the Group may decide not to insure against certain risks. For example, it is generally difficult or not economically practicable to obtain insurance against losses resulting from wars or acts of terrorism, and insurers have recently become more reluctant to insure against these types of events. The occurrence of a significant event that is uninsured or that results in a loss in excess of insured limits could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group is subject to antitrust and competition laws in certain jurisdictions and the risk of changes in such laws or in the interpretation and enforcement of existing antitrust and competition laws.
The Group is subject to antitrust and competition laws in the jurisdictions in which it operates and certain of its acquisitions have resulted in investigations by antitrust and competition authorities. There can be no assurance that the introduction of new antitrust or competition laws in the jurisdictions in which the Group operates or the interpretation or enforcement of existing antitrust or competition laws will not affect the Group's business and operations in the future. Any failure by the Group to comply with antitrust or competition laws could have a material adverse effect on its business, results of operations, financial condition and/or cash flows.
The Group may incur further liabilities in respect of its defined benefit pension schemes if the value of the plan assets is not sufficient to cover potential liabilities under the schemes.
The Group operates a number of closed defined benefit plans in a number of countries, primarily in Ireland, the UK, the United States and the Netherlands. These defined benefit plans mostly include final salary pension plans but also include career average salary pension plans and post-retirement medical plans. The post- retirement medical plans are in respect of a number of the Group's U.S. employees.
As at 31 December 2018, the Group had a net deficit (after deferred tax) of €44.0 million (2017: €102.0 million) in its defined benefit schemes. Funding for the Group's defined benefit plans is based upon the funded status of the schemes and a number of actuarial assumptions, including an expected long-term rate of return on assets and a discount rate. There are inherent uncertainties surrounding the financial and demographic assumptions adopted by the Group for calculating the value of the liabilities of its defined benefit plans. These assumptions may differ from the actual data as a result of changes in economic and market conditions as well as the actual experience within each scheme. The present value of the Group's defined benefit plans' liabilities is heavily dependent on the discount rate. As the discount rate is based on the interest yield on high-quality corporate bonds at the applicable balance sheet date, the present value of the Group's defined benefit plans' liabilities can fluctuate significantly over time. The expected rate of inflation also influences the plans' liabilities because inflation is the basis for the calculation of the assumed future salary and revaluation increases in each plan, where applicable. In addition, differing expectations regarding current and future changes in mortality rates can have a significant impact on plans' liabilities, as increases and decreases in life expectancy affect the period of time over which the Group would have to make payments to an individual under one of its plans.
Any changes in these assumptions could have a significant impact on the Group's present and future liabilities to, and costs associated with, the Group's defined benefit plans, and could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group's success depends upon its employees and the recruitment and retention of key personnel.
The Group's performance, operating results and future growth depend, to a large extent, on its continued ability to attract, retain, motivate, integrate and organise appropriately qualified personnel with the level of expertise, skills and knowledge necessary to conduct the Group's operations. Competition for talented and qualified employees is intense, and the Group faces various challenges inherent in the management of a large number of
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employees over diverse geographical regions. Key employees may choose to leave their employment for a variety of reasons, including reasons beyond the Group's control. In addition, the Group relies on its senior management team, many of whom have been with the Group for many years. If the Group is unable to attract and retain sufficiently qualified management and employees with the right capabilities and experience, particularly in the area of research and development and in developing markets, or fails to adequately plan for the succession of senior management roles, the Group may not be able to sustain or further develop its business, which could have a material adverse effect on its results of operations, financial condition and/or cash flows.
The Group is subject to the risk of increased income taxes as a result of changes in law and/or as a result of different interpretations of tax law.
The calculation of the Group's income taxes involves a degree of estimation and judgment as the Group operates in many jurisdictions and the tax treatment of certain items or transactions cannot be fully determined at the time of reporting. The Group adopts tax filing positions based upon tax laws, administrative practices and judicial decisions currently in effect in the jurisdictions in which it has assets or operates, all of which are subject to change or differing interpretations, possibly with retroactive effect.
The Group may be subject to tax audits in any of the jurisdictions in which it operates, which by their nature are often complex and can require several years to conclude. There can be no assurance as to the final resolution of any such audit or any resulting proceedings. If any such audit or any ensuing proceedings are determined adversely against the Group, this could result in the Group owing significant amounts of tax, interest and possibly penalties, which could have a material adverse effect on its business, results of operation, financial condition and/or cash flows.
Unethical conduct and non-compliance with applicable laws and regulations could damage the Group's reputation.
The Group's Code of Conduct and related policies define the Group's commitment to integrity, fairness and transparency, compliance with legal and regulatory requirements, high ethical standards and the behaviours and actions the Group expects of businesses and people wherever it operates. Incidents of unethical behaviour, fraudulent activity or non-compliance with applicable laws and regulations could be damaging to the Group's operations and reputation. Multiple events of non-compliance could call into question the integrity of the Group's operations and have a material adverse impact on the Group's business and growth prospects. In addition, if the Group's employees violate laws and regulations of jurisdictions in which the Group operates, the Group may be subject to penalties, fines or other measures, which could have a material adverse effect on the Group's reputation, business, results of operations, financial condition and/or cash flows.
The Group's reputation is a valuable asset and the way in which the Group operates, contributes to society and engages with the world is always under scrutiny. Despite the Group's commitment to conduct business ethically and the steps taken to adhere to this commitment, there remains a risk that activities, behaviours or events cause the Group to fall short of its desired standards which could have a material adverse effect on the Group's business and reputation.
The Group's inability to effectively manage costs could adversely affect its future profitability and growth.
The Group's future profitability and growth depend on its ability to effectively manage operating costs and per- unit product costs and to maintain and implement effective cost control programmes, while at the same time maintaining competitive pricing and product quality, customer service and support. The Group's ability to maintain a competitive cost structure depends on continued management of manufacturing, delivery and administrative costs, as well as the implementation of cost-effective purchasing programmes for raw materials, energy and related manufacturing requirements. If the Group is unable to effectively manage its operating costs and maintain the productivity and reliability of its production facilities, the Group's profitability and growth could be adversely affected, which could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
The Group is exposed to the risk of litigation.
From time to time, the Group may be involved in, or threatened with, legal or other proceedings in the ordinary course of its business, including disputes with customers concerning product quality and product liability claims. Given the inherent uncertainty of litigation, it is possible that the Group may incur liabilities as a consequence of the proceedings and claims brought against it. Exposure to litigation or regulatory investigations
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could negatively affect the Group's reputation and could have a material adverse effect on the Group's business, results of operations, financial condition and/or cash flows.
Certain statements of competitive position and market information contained in this Offering Circular are not based on independent third-party sources.
This Offering Circular includes statements relating to the Group's competitive position, and statements relating to the markets in which it operates and their expected development. See "Business Description—Strengths— Market Leading Positions and Strong Brands," "Business Description—Businesses—Taste & Nutrition- Markets and Customers" and "Business Description—Businesses—Consumer Foods—Markets and Customers". In some cases, there are no third-party sources in support of the statements and, accordingly, they have not been verified by third parties and are based on the Group's knowledge of the markets in which it operates and its own experience. Actual market developments may differ significantly from those presented in this Offering Circular because of known and unknown risks, uncertainties and other factors, including those described in this section, as well as the subjectivity of the Group's evaluation of the markets in which it operates and their prospects. Investors should not place undue reliance on this information.
Risks related to the Notes
Set out below is a brief description of certain risks relating to the Notes generally:
If the Issuer or the Guarantor defaults, your right to receive payments under the Notes or the Guarantee may be adversely affected by Irish insolvency laws.
The Issuer and the Guarantor each has its registered office in Ireland and consequently it is likely that any insolvency proceedings applicable to the Issuer or the Guarantor would be governed by Irish law. If an Irish company is unable, or likely to be unable, to pay its debts, it can be placed under court protection from its creditors with a court-appointed independent professional (an "Examiner") to facilitate the survival of the company and the whole or any part of its business. Where an Examiner is appointed to a company, an Examiner may also be appointed to a related company, such as a parent, subsidiary or affiliate. If an Examiner is appointed, a protection period will be imposed so that the Examiner can formulate his proposals for a compromise or scheme of arrangement to facilitate such survival. Provided that at least one class of creditor votes in favour of accepting the examiner's proposals, the examiner may proceed to seek court approval sanctioning his scheme of arrangement, thereby making it binding on all parties, including dissenting parties.
1. Court Approval – During the protection period, any enforcement action by a creditor of the Irish company is prohibited. In addition, the Irish company would be prohibited from paying any debts existing at the time of the presentation of the petition to appoint an examiner, unless specifically sanctioned by court order.
2. Guarantee – Although there is a legislative prohibition on enforcing guarantees given by third parties during the protection period, the liability of a guarantor remains notwithstanding that the principal debt may be varied pursuant to a scheme of arrangement. However, in order to pursue its rights under the guarantee, a creditor must go through a notice procedure with the guarantor prior to the meeting of creditors to consider the scheme of arrangement. Failure to adhere to the notice procedure can result in a creditor losing its rights pursuant to the guarantee.
In an insolvency of the Issuer or Guarantor, the claims of certain preferential creditors (including the Irish Revenue Commissioners for certain unpaid taxes) will rank in priority to claims of unsecured creditors and certain secured creditors, if any.
If the Issuer or Guarantor becomes subject to an insolvency proceeding and either of them has obligations to creditors that are treated under Irish law as creditors that are senior relative to the holders of the Guarantees (including secured creditors), the holders of the Notes may suffer losses as a result of their subordinated status during such insolvency proceeding.
The Guarantor's ability to pay amounts due under the Guarantee will depend on dividends and other payments received from Subsidiaries.
The Guarantor's results of operation and financial condition are substantially dependant on the trading performance of members of the Group. The Guarantor's ability to pay amounts due under the Guarantee will
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depend upon the level of distribution and other payments, if any, it receives from the Guarantor's operating Subsidiaries. Certain of the Guarantor's operating Subsidiaries are and may, from time to time, be subject to restrictions on their ability to make distributions including as a result of foreign exchange and other regulatory restrictions or agreements with pension fund trustees.
Notes may not be a suitable investment for all investors.
The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
• have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Offering Circular or any applicable supplement;
• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
• have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor's currency or where the currency for principal or interest payments is different from the currency in which such potential investor's financial activities are principally denominated;
• understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and
• be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
As the Global Note is held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer and the Guarantor.
The Notes will be represented by the Global Note Certificate except in certain limited circumstances described in the Global Note Certificate. The Global Note Certificate will be registered in the name of a nominee for, and deposited with, the common safekeeper for Euroclear and Clearstream, Luxembourg. Individual Note Certificates evidencing holdings of Notes will only be available in certain limited circumstances. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Note Certificate. While the Notes are represented by the Global Note Certificate, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg.
The Issuer and the Guarantor will discharge their payment obligations under the Notes by making payments to or to the order of the common safekeeper for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in the Global Note Certificate must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Notes. The Issuer and the Guarantor have no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Note Certificate.
Holders of beneficial interests in the Global Note Certificate will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies.
Minimum Denomination.
As the Notes have a denomination consisting of the minimum denomination plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts in excess of EUR100,000 (or its equivalent) that are not integral multiples of EUR100,000 (or its equivalent). In such case a Noteholder who, as a result of trading such amounts, holds a principal amount of less than the minimum denomination may not receive an Individual Note Certificate in respect of such holding (should Individual Note Certificates be printed) and would need to purchase a principal amount of Notes such that its holding amounts to the minimum denomination.
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If the Notes are redeemed early, an investor may not be able to reinvest such proceeds in a comparable security.
In the event that the Notes are redeemed early in accordance with Condition 5 (Redemption and Purchase of the "Terms and Conditions of the Notes"), depending on prevailing market conditions at the time, an investor who receives proceeds due to such an early redemption may not be able to reinvest such proceeds in a comparable security at an effective interest rate as high as that carried by the Notes
Redemption prior to maturity for tax reasons.
In the event that the Issuer would be obliged to increase the amounts payable in respect of the Notes due to any change in or amendment to the laws or regulations of the Republic of Ireland or any political sub-division thereof or of any authority therein or thereof having the power to tax or in the interpretation or administration thereof, the Issuer may redeem all outstanding Notes in accordance with the Terms and Conditions of the Notes. It may not be possible to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes and this may only be possible at a significantly lower rate.
The Issuer or the Guarantor, as the case may be, may not be able to finance a change of control put option as required by the terms and conditions of the Notes.
Upon the occurrence of certain change of control events, the Issuer, may be required by a Noteholder to redeem all its outstanding Notes at the principal amount of the Notes, plus accrued and unpaid interest and additional amounts, to the date of the Optional Redemption Date. If any such change of control event were to occur, there can be no assurance that the Issuer would have sufficient funds available at the time to redeem the aggregate principal amount of the Notes in relation to which the Put Option is exercised. The change of control may cause the acceleration of other indebtedness that may be senior to the Notes or rank equally with the Notes. See Condition 5(c) (Redemption and Purchase—Redemption on Change of Control of the "Terms and Conditions of the Notes").
Independent review and advice.
Each prospective investor in the Notes must determine, based on its own independent review and such professional advice as it deems appropriate under the circumstances, that its acquisition of the Notes is fully consistent with its financial needs, objectives and condition, complies and is fully consistent with all investment policies, guidelines and restrictions applicable to it and is a fit, proper and suitable investment for it, notwithstanding the clear and substantial risks inherent in investing in or holding the Notes. A prospective investor may not rely on the Issuer, the Guarantor or the Managers or any of their respective affiliates in connection with its determination as to the legality of its acquisition of the Notes or as to the other matters referred to above.
Legality of purchase.
Neither the Issuer, the Guarantor, the Managers nor any of their respective affiliates has or assumes responsibility for the lawfulness of the subscription or acquisition of the Notes by a prospective investor in the Notes, whether under the laws of the jurisdiction of its incorporation or the jurisdiction in which it operates (if different), or for compliance by that prospective investor with any law, regulation or regulatory policy applicable to it.
A Noteholder's actual yield on the Notes may be reduced from the stated yield by transaction costs.
When Notes are purchased or sold, several types of incidental costs (including transaction fees and commissions) are incurred in addition to the current price of the security. These incidental costs may significantly reduce or even exclude the profit potential of the Notes. For instance, credit institutions may charge their clients for commissions which are either fixed minimum commissions or pro rata commissions depending on the order value. To the extent that additional—domestic or foreign—parties are involved in the execution of an order, including but not limited to domestic dealers or brokers in foreign markets, Noteholders must take into account that they may also be charged for the brokerage fees, commissions and other fees and expenses of such parties (third party costs). In addition to such costs directly related to the purchase of securities (direct costs), Noteholders must also take into account any follow-up costs (such as custody fees).
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Investors should inform themselves about any additional costs incurred in connection with the purchase, custody or sale of the Notes before investing in the Notes.
Risks related to the market generally.
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
The secondary market generally.
The Notes may have no established trading market when issued, and one may never develop. If the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer and the Guarantor. Although application has been made for the Notes to be admitted to listing on Euronext Dublin and to trading on the Global Exchange Market, there is no assurance that such application will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Notes.
The trading market for debt securities may be volatile and may be adversely impacted by many events.
The market for debt securities issued by the Issuer is influenced by economic and market conditions and, to varying degrees, market conditions, interest rates, currency exchange rates and inflation rates in other European and other industrialised countries. There can be no assurance that events in the Republic of Ireland or elsewhere will not cause market volatility or that such volatility will not adversely affect the price of Notes or that economic and market conditions will not have any other adverse effect.
Exchange rate risks and exchange controls.
The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than Euro. These include the risk that exchange rates may change significantly (including changes due to devaluation of Euro or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Euro would decrease (i) the Investor's Currency-equivalent yield on the Notes, (ii) the Investor's Currency equivalent value of the principal payable on the Notes and (iii) the Investor's Currency-equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Interest rate risk.
Investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Notes.
Market value of the Notes.
The value of the Notes depends on a number of interrelated factors, including economic, financial and political events in the Republic of Ireland or elsewhere, including factors affecting capital markets generally and the stock exchanges on which the Notes are traded. The price at which a Noteholder will be able to sell the Notes prior to maturity may be at a discount, which could be substantial, from the issue price or the purchase price paid by such purchaser.
Credit rating may not reflect all risks.
The Notes are expected to be rated Baa2 (Stable) by Moody's and BBB+ (Stable) by S&P. The ratings assigned by Moody's and S&P to the Notes may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
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Change of law.
The Terms and Conditions of the Notes are governed by the laws of England and Wales in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to the laws of England and Wales or administrative practice or the official application or interpretation of the laws of England and Wales after the date of this Offering Circular. Furthermore, the Guarantor operates in a heavily regulated environment and has to comply with extensive regulations in the Republic of Ireland and elsewhere. No assurance can be given as to the impact of any possible judicial decision or change to laws or administrative practices after the date of this Offering Circular.
Taxation.
Potential purchasers and sellers of the Notes should be aware that they may be required to pay taxes or other documentary charges or duties in accordance with the laws and practices of the country where the Notes are transferred or other jurisdictions.
Further, a Noteholder's effective yield on the Notes may be diminished by the tax impact on that Noteholder of its investment in the Notes. Potential investors are advised not to rely upon the tax summary contained in this Offering Circular but to ask for their own tax adviser's advice on their individual taxation with respect to the acquisition, holding, sale and redemption of the Notes. Only these advisers are in a position to duly consider the specific situation of each potential investor. This investment consideration has to be read in connection with the taxation sections of this Offering Circular. Each prospective investor should consult its own advisers as to legal, tax and related aspects of an investment in the Notes.
Legal investment considerations may restrict certain investments.
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) Notes are legal investments for it, (ii) Notes can be used as collateral for various types of borrowing and (iii) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.
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TERMS AND CONDITIONS OF THE NOTES
The following is the text of the terms and conditions of the Notes which, subject to amendment and completion and except for the text in italics, will be endorsed on each Note Certificate (if issued):
The EUR 750,000,000 0.625 per cent. Guaranteed Notes due 2029 (the "Notes", which expression includes any further notes issued pursuant to Condition 14 (Further issues) and forming a single series therewith) of Kerry Group Financial Services (the "Issuer") are constituted by, are subject to, and have the benefit of, a trust deed dated 20 September 2019 (as amended or supplemented from time to time, the "Trust Deed") between the Issuer, Kerry Group plc (the "Guarantor") and Deutsche Trustee Company Limited as trustee (the "Trustee", which expression includes all persons for the time being trustee or trustees appointed under the Trust Deed) and are the subject of an agency agreement dated 20 September 2019 (as amended or supplemented from time to time, the "Agency Agreement") between the Issuer, the Guarantor, Deutsche Bank Luxembourg S.A. as registrar (the "Registrar", which expression includes any successor registrar appointed from time to time in connection with the Notes), Deutsche Bank AG, London Branch as principal paying agent (the "Principal Paying Agent", which expression includes any successor principal paying agent appointed from time to time in connection with the Notes), the transfer agents named therein (the "Transfer Agents", which expression includes any successor or additional transfer agents appointed from time to time in connection with the Notes), the paying agents named therein (together with the Principal Paying Agent, the "Paying Agents", which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes) and the Trustee. The issue of the Notes was authorised by a resolution of the Board of Directors of the Issuer passed on 23 August 2019 and the guarantee of the Notes was authorised by a resolution of the Board of Directors of the Guarantor passed on 7 August 2019. References herein to the "Agents" are to the Registrar, the Principal Paying Agent, the Transfer Agents and the Paying Agents and any reference to an "Agent" is to any one of them. Certain provisions of these Conditions are summaries of the Trust Deed and the Agency Agreement and are subject to their detailed provisions. The Noteholders (as defined below) are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Agency Agreement applicable to them. Copies of the Trust Deed and the Agency Agreement are available for inspection by Noteholders during normal business hours at the registered office for the time being of the Trustee, being at the date hereof Winchester House, 1 Great Winchester Street, London EC2N 2DB and at the Specified Offices (as defined in the Agency Agreement) of each of the Agents, the initial Specified Offices of which are set out below.
1. Form, Denomination, Status and Guarantee
(a) Form and denomination
The Notes are in registered form in denominations of EUR100,000 and integral multiples of EUR1,000 in excess thereof (each, an "Authorised Denomination").
(b) Status of the Notes
The Notes constitute direct, general, senior, unsubordinated, unconditional and unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.
(c) Guarantee of the Notes
The Guarantor has, in the Trust Deed, unconditionally and irrevocably guaranteed the due and punctual payment of all sums from time to time payable by the Issuer in respect of the Notes. This guarantee (the "Guarantee of the Notes") constitutes a direct, general, senior, unsubordinated, unconditional and unsecured obligation of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured and unsubordinated obligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application (subject to Condition 3 (Negative Pledge)).
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2. Register, Title and Transfers
(a) Register
The Registrar will maintain a register (the "Register") in respect of the Notes in accordance with the provisions of the Agency Agreement. In these Conditions, the "Holder" of a Note means the person in whose name such Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and "Noteholder" shall be construed accordingly. A certificate (each, a "Note Certificate") will be issued to each Noteholder in respect of its registered holding. Each Note Certificate will be numbered serially with an identifying number which will be recorded in the Register.
(b) Title
The Holder of each Note shall (except as otherwise required by law) be treated as the absolute owner of such Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing on the Note Certificate relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Note Certificate) and no person shall be liable for so treating such Holder. No person shall have any right to enforce any term or condition of the Notes or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.
(c) Transfers
Subject to paragraphs (f) (Closed periods) and (g) (Regulations concerning transfers and registration) below, a Note may be transferred upon surrender of the relevant Note Certificate, with the endorsed form of transfer duly completed, at the Specified Office of the Registrar or any Transfer Agent, together with such evidence as the Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided, however, that a Note may not be transferred unless the principal amount of Notes transferred and (where not all of the Notes held by a Holder are being transferred) the principal amount of the balance of Notes not transferred are Authorised Denominations. Where not all the Notes represented by the surrendered Note Certificate are the subject of the transfer, a new Note Certificate in respect of the balance of the Notes will be issued to the transferor.
(d) Registration and delivery of Note Certificates
Within five business days of the surrender of a Note Certificate in accordance with paragraph (c) (Transfers) above, the Registrar will register the transfer in question and deliver a new Note Certificate of a like principal amount to the Notes transferred to each relevant Holder at its Specified Office or (as the case may be) the Specified Office of any Transfer Agent or (at the request and risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant Holder. In this paragraph, "business day" means a day on which commercial banks are open for general business (including dealings in foreign currencies) in the city where the Registrar or (as the case may be) the relevant Transfer Agent has its Specified Office.
(e) No charge
The transfer of a Note will be effected without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent but against such indemnity as the Registrar or (as the case may be) such Transfer Agent may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer.
(f) Closed periods
Noteholders may not require transfers to be registered during the period of 15 days ending on the due date for any payment of principal or interest in respect of the Notes.
(g) Regulations concerning transfers and registration
All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer
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with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations.
3. Negative Pledge
So long as any Note remains outstanding (as defined in the Trust Deed), neither the Issuer nor the Guarantor shall, and the Issuer and the Guarantor shall procure that no Subsidiary of the Guarantor will, create or permit to subsist any Security Interest, other than a Permitted Security Interest, upon the whole or any part of its present or future undertaking, assets or revenues (including uncalled capital) to secure any Relevant Indebtedness or Guarantee of Relevant Indebtedness without (a) at the same time or prior thereto securing the Notes equally and rateably therewith to the satisfaction of the Trustee or (b) providing such other security for the Notes as the Trustee may in its absolute discretion (without any liability thereof) consider to be not materially less beneficial to the interests of the Noteholders or as may be approved by an Extraordinary Resolution (as defined in the Trust Deed) of Noteholders.
In these Conditions:
"Guarantee" means, in relation to any Relevant Indebtedness of any Person, any obligation of another Person to pay such indebtedness including (without limitation):
(a) any obligation to purchase such indebtedness;
(b) any obligation to lend money, to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such indebtedness;
(c) any indemnity against the consequences of a default in the payment of such indebtedness; and
(d) any other agreement to be responsible for such indebtedness;
"Permitted Security Interest" means:
(a) a Security Interest which is created to secure or provide for the payment of Relevant Indebtedness in connection with any Project Financing provided that the assets or revenues subject to such Security Interest are (i) assets which are used or to be used in or in connection with the project to which such Project Financing relates or (ii) revenues or claims which arise from the operation, failure to meet specifications, exploitation, sale or loss of, or damage to, such assets; or
(b) a Security Interest on any property, income or assets of a Person existing at the time that such Person is acquired, merged into or consolidated with the Issuer, the Guarantor or any of their respective Subsidiaries, provided that such Security Interest was not created in contemplation of such event and does not extend to any assets, property or income of the Issuer, the Guarantor or any of their respective Subsidiaries other than the surviving Person and its Subsidiaries;
"Person" means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality;
"Project Financing" means any indebtedness incurred solely to finance a project or the restructuring or expansion of an existing project, in each case for the acquisition, construction, development or exploitation of any property pursuant to which the person or persons to whom such indebtedness is or may be owed by the relevant borrower (whether or not the Issuer, the Guarantor or any of their respective Subsidiaries) (i) expressly agrees or agree that the principal source of repayment of such funds will be that property or assets or revenues generated by such project (or by such restructuring or expansion thereof) and (ii) has or have no other recourse whatsoever to the Issuer, the Guarantor or any of their respective Subsidiaries (or any of their assets and/or revenues) for the repayment of or a payment of any sum relating to such indebtedness;
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"Relevant Indebtedness" means any indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which for the time being is, or is intended to be (with the agreement of the Issuer or the Guarantor), quoted, listed or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market);
"Security Interest" means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction; and
"Subsidiary" means, in relation to any Person (the "first Person") at any particular time, any other Person (the "second Person"):
(a) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or remove members of the governing body of the second Person or otherwise; or
(b) whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first Person.
4. Interest
The Notes bear interest from and including 20 September 2019 (the "Issue Date") at the rate of 0.625 per cent. per annum (the "Rate of Interest"), payable in arrear on 20 September in each year (each, an "Interest Payment Date") commencing on 20 September 2020, subject as provided in Condition 6 (Payments).
Each Note will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused, in which case it will continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (b) the day which is seven days after the Principal Paying Agent or the Trustee has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).
The amount of interest payable on each Interest Payment Date shall be EUR 625 in respect of each Note of EUR100,000 denomination and EUR 6.25 in respect of each Calculation Amount. If interest is required to be paid in respect of a Note on any other date, it shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearest cent (half a cent being rounded upwards) and multiplying such rounded figure by a fraction equal to the Authorised Denomination of such Note divided by the Calculation Amount, where:
"Calculation Amount" means EUR1,000;
"Day Count Fraction" means, in respect of any period, the number of days in the relevant period, from (and including) the first day in such period to (but excluding) the last day in such period, divided by the number of days in the Regular Period in which the relevant period falls; and
"Regular Period" means each period from (and including) the Issue Date or any Interest Payment Date to (but excluding) the next Interest Payment Date.
5. Redemption and Purchase
(a) Scheduled redemption
Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on 20 September 2029, subject as provided in Condition 6 (Payments).
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(b) Redemption for tax reasons
The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving no fewer than 30 nor more than 60 days' notice to the Noteholders in accordance with Condition 15 (Notices) (which notice shall be irrevocable) at their principal amount, together with interest accrued to the date fixed for redemption, if, immediately before giving such notice, the Issuer satisfies the Trustee that:
(i) (A) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the Republic of Ireland or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after 18 September 2019; and (B) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; or
(ii) (A) the Guarantor has or (if a demand were to be made under the Guarantee of the Notes) would become obliged to pay additional amounts as provided or referred to in Condition 7 (Taxation) or the Guarantee of the Notes or the Guarantor has or will become obliged to make any such withholding or deduction as is referred to in Condition 7 (Taxation) or the Guarantee of the Notes, as the case may be, from any amount paid by it to the Issuer in order to enable the Issuer to make a payment of principal or interest in respect of the Notes, in either case as a result of any change in, or amendment to, the laws or regulations of the Republic of Ireland or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after 18 September 2019; and (B) such obligation cannot be avoided by the Guarantor taking reasonable measures available to it,
provided, however, that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or the Guarantor would be obliged to pay such additional amounts or the Guarantor would be obliged to make such withholding or deduction if a payment in respect of the Notes were then due or (as the case may be) a demand under the Guarantee of the Notes were then made.
Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver or procure that there is delivered to the Trustee:
(A) a certificate signed by two directors of the Issuer stating that the circumstances referred to in (i)(A) and (i)(B) prevail and setting out the details of such circumstances or (as the case may be) a certificate signed by two directors of the Guarantor stating that the circumstances referred to in (ii)(A) and (ii)(B) above prevail and setting out the details of such circumstances; and
(B) an opinion in form and substance satisfactory to the Trustee of independent legal advisers of recognised standing to the effect that the Issuer or (as the case may be) the Guarantor has or will become obliged to pay such additional amounts or (as the case may be) the Guarantor has or will become obliged to make such withholding or deduction as a result of such change or amendment.
The Trustee shall (without any liability therefor) be entitled to accept such certificate and opinion as sufficient evidence of the satisfaction of the circumstances set out in (i)(A) and (i)(B) above or (as the case may be) (ii)(A) and (ii)(B) above, in which event they shall be conclusive and binding on the Noteholders.
Upon the expiry of any such notice as is referred to in this Condition 5(b), the Issuer shall be bound to redeem the Notes in accordance with this Condition 5(b).
(c) Redemption on Change of Control
If at any time while any Note remains outstanding, either of the following events shall occur (each, as applicable, a "Put Event"):
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(i) a Change of Control occurs and, if at the start of the Change of Control Period the Notes are rated by any Rating Agency, a Rating Downgrade occurs within such Change of Control Period and is not, within the Change of Control Period, remedied (such that, where the relevant rating has been changed, it is upgraded to the rating that was in place immediately before the Rating Downgrade or, where the relevant rating is withdrawn, such rating is reinstated); or
(ii) a Change of Control occurs and, on the occurrence of the Change of Control, the Notes are not rated by any Rating Agency,
then the Holder of each Note will have the option (the "Put Option") (unless, prior to the giving of the Put Event Notice (as defined below), the Issuer gives notice of its intention to redeem the Notes under Condition 5(b) (Redemption for tax reasons) to require the Issuer to redeem or, at the Issuer's option, to purchase or procure the purchase of that Note on the Optional Redemption Date (as defined below), at its principal amount together with (or, where purchased, together with an amount equal to) accrued interest up to but excluding the Optional Redemption Date.
For the purposes of this Condition 5(c):
A "Change of Control" occurs if any person or group, acting in concert (other than a member of the Group, or a group comprising only members of the Group, acting in concert), gains Control of the Issuer or the Guarantor;
"Control" means (i) any direct or indirect legal or beneficial ownership of, or any direct or indirect legal or beneficial entitlement to, in the aggregate, more than 50 per cent. of the ordinary shares of the Issuer or the Guarantor, the right to directly or indirectly appoint a majority of the directors of the Issuer or the Guarantor, or any other ability to control the affairs of the Issuer or the Guarantor, or (ii) in the event of a tender offer for shares of the Issuer or the Guarantor, circumstances where (A) the shares already in the control of the offeror and the shares with respect to which the offer has been accepted carry in aggregate more than 50 per cent. of the voting rights in the Issuer or, as relevant, the Guarantor, and (B) at the same time the offer has become unconditional, or (iii) the disposal or transfer by the Issuer or the Guarantor of all or substantially all of its assets to another person or other persons;
"Change of Control Period" means the period:
(a) commencing on the date that is the earlier of (A) the date of the first public announcement of the relevant Change of Control and (B) the date of the earliest Potential Change of Control Announcement (as defined below), if any; and
(b) ending on the date which is 120 days after the date of the relevant public announcement (such 120th day, the "Initial Longstop Date");
provided that, unless any other Rating Agency has on or prior to the Initial Longstop Date effected a Rating Downgrade in respect of its rating of the Notes, if a Rating Agency publicly announces, at any time during the period commencing on the date which is 60 days prior to the Initial Longstop Date and ending on the Initial Longstop Date, that it has placed its rating of the Notes under consideration for rating review either entirely or partially as a result of the relevant public announcement of the Change of Control or Potential Change of Control Announcement, the Change of Control Period shall be extended to the date which falls 60 days after the date of such public announcement by such Rating Agency;
"Rating Agency" means any of the following: (i) Fitch Ratings Limited ("Fitch") or Moody's Investors Service Limited ("Moody's") or S&P Global Ratings Europe Limited ("Standard & Poor's") or (ii) any other rating agency of equivalent international standing specified from time to time by the Issuer, and, in each case, their respective successors or affiliates;
a "Rating Downgrade" shall be deemed to have occurred in respect of a Change of Control if, within the Change of Control Period, the rating assigned to the Notes by any Rating Agency at the start of the Change of Control Period is (i) withdrawn or (ii) changed from an investment grade rating (BBB- in the case of Standard & Poor's and Fitch / Baa3 in the case of Moody's, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+ in the case of Standard & Poor's and Fitch / Ba1 in the case of Moody's, or their respective equivalents for the time being, or worse) or
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(iii) if the rating previously assigned to the Notes by any Rating Agency at the start of the Change of Control Period was below an investment grade rating (as described above), is lowered by at least one full rating notch (for example, from BB+ to BB or their respective equivalents); and
"Potential Change of Control Announcement" means any public announcement or statement by the Issuer, the Guarantor, or any shareholder of the Issuer or Guarantor, or any actual or potential bidder or any designated adviser thereto relating to any specific and near-term potential Change of Control (where "near-term" shall mean that such potential Change of Control is reasonably likely to occur, or is publicly stated by the Issuer or Guarantor, any such actual or potential bidder or any such designated adviser to be intended to occur, within 120 days of the date of such announcement or statement).
Promptly upon the Issuer becoming aware that a Put Event has occurred, the Issuer shall give notice (a "Put Event Notice") to the Noteholders in accordance with Condition 15 (Notices) specifying the nature of the Put Event and the circumstances giving rise to it and the procedure for exercising the Put Option contained in this Condition.
To exercise the Put Option, the Noteholder must deliver any applicable Note to the Specified Office of any Agent for the account of the Issuer within the period (the "Put Period") of 30 days after the day on which the Put Event Notice is given, together with a duly signed and completed Put Option Notice in the form (for the time being current and substantially in the form set out in the Agency Agreement) obtainable from the Specified Office of any Agent.
Subject to the delivery of any such Notes to the Specified Office of an Agent for the account of the Issuer as described above, the Issuer shall redeem the Notes in respect of which the Put Option has been validly exercised as provided above on the date which is the fifth business day following the end of the Put Period (the "Optional Redemption Date"). The Agent to whom a Note has been so deposited shall deliver a duly completed receipt ("Put Option Receipt") to the depositing Noteholder. No duly completed Put Option Notice, once so deposited with such Notes in accordance with this Condition 5(c), may be withdrawn; provided, however, that if, prior to the relevant Optional Redemption Date, any such Note becomes immediately due and payable or, upon due presentation of any such Note on or prior to the end of the Put Period, payment of the redemption moneys is improperly withheld or refused on the relevant Optional Redemption Date, the relevant Agent shall mail notification thereof to the depositing Noteholder at such address as may have been given by such Noteholder in the relevant Put Option Notice and shall hold such Note at its Specified Office for collection by the depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any outstanding Note is held by an Agent in accordance with this Condition, the depositor of such Note and not such Agent shall be deemed to be the holder of the Note for all purposes.
(d) Redemption at the Option of the Issuer (Issuer Maturity Par Call and Issuer Make-Whole Call)
The Issuer may, unless a Put Notice has been given pursuant to Condition 5(c) (Redemption on Change of Control):
(i) at any time on or after 20 June 2029, on giving not more than 60 nor fewer than 30 days' irrevocable notice to Noteholders, redeem all, but not some only, of the Notes at their principal amount, together with interest accrued to the date fixed for redemption; or
(ii) at any time prior to 20 June 2029, on giving not more than 60 nor fewer than 30 days' notice to Noteholders (which notice shall be irrevocable and shall specify the date fixed for redemption (the "Optional Redemption Date"), redeem all, but not some only, of the Notes at a redemption price per Note equal to the higher of the following, in each case together with interest accrued to but excluding the Optional Redemption Date:
x. the principal amount of the relevant Note; and
y. the sum of the then current values of the remaining scheduled payments of principal and interest (not including any interest accrued on the relevant Note to, but excluding, the Optional Redemption Date) discounted to the Optional Redemption Date on an annual basis (based on the actual number of days elapsed divided by 365 or (in the case of a leap year) by 366) at the Reference Dealer Rate (as defined below) plus a margin of 0.20 per cent., in each case as determined by the Reference Dealers.
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In this Condition 5(d):
"Reference Dealers" means any dealers of German Bundesanleihe securities appointed by the Issuer in good faith;
"Reference Dealer Rate" means with respect to the Reference Dealers and the Optional Redemption Date, the average of the five quotations of the mid-market annual yield to maturity of the Reference Stock or, if the Reference Stock is no longer outstanding, a similar security in the reasonable judgement of the Reference Dealers, at 3.30 p.m. Frankfurt, Germany time on the third business day in Frankfurt, Germany preceding the Optional Redemption Date quoted in writing to the Issuer and the Trustee by the Reference Dealers; and
"Reference Stock" means the 0.00 per cent. German Bundesanleihe security due 15 August 2029.
(e) No other redemption
The Issuer shall not be entitled to redeem the Notes otherwise than as provided in paragraphs (a) (Scheduled redemption) to (d) (Redemption on at the Option of the Issuer (Issuer Maturity Par Call and Issuer Make-Whole Call) above, or through purchase and cancellation in accordance with paragraphs (f) (Purchase) and (g) (Cancellation) below.
(f) Purchase
The Issuer, the Guarantor or any of their respective Subsidiaries may at any time purchase Notes in the open market or otherwise and at any price. Such Notes may be held, reissued, resold or, at the option of the Issuer, the Guarantor or the relevant Subsidiary, surrendered to any Paying Agent for cancellation. Any Notes so purchased, while held on behalf of the Issuer, the Guarantor or any such Subsidiary, shall not entitle the Holder to vote at any meeting of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quora at meetings of Noteholders for the purposes of Condition 12(a).
(g) Cancellation
All Notes which are redeemed shall be forthwith cancelled. All Notes so cancelled and any Notes purchased and subsequently surrendered for cancellation pursuant to Condition 5(f) above shall be cancelled and may not be reissued or resold.
6. Payments
(a) Principal
Payments of principal shall be made by euro cheque drawn on, or, upon application by a Holder of a Note to the Specified Office of the Principal Paying Agent not later than the fifteenth day before the due date for any such payment, by transfer to a euro account (or other account to which euro may be credited or transferred) maintained by the payee with, a bank in a city in which banks have access to the Trans European Automated Real time Gross settlement Express Transfer (TARGET) system (the "TARGET System") and (in the case of redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent.
(b) Interest
Payments of interest shall be made by euro cheque drawn on, or, upon application by a Holder of a Note to the Specified Office of the Principal Paying Agent not later than the fifteenth day before the due date for any such payment, by transfer to a euro account (or other account to which euro may be credited or transferred) maintained by the payee with, a bank in a city in which banks have access to the TARGET System and (in the case of interest payable on redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent.
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(c) Interpretation: In these conditions
"TARGET2" means the Trans-European Automated Real-Time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007;
"TARGET Settlement Day" means any day on which TARGET2 is open for the settlement of payments in euro; and
"TARGET System" means the TARGET2 system.
(d) Payments subject to fiscal laws
All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7 (Taxation), and (ii) any withholding or deduction required pursuant to an agreement described in section 1471(b) of the United States Internal Revenue Code of 1986, as amended (the "Code") or otherwise imposed pursuant to sections 1471 to 1474 of the Code, any regulations or agreements thereunder, any interpretations thereof, or (without prejudice to the provisions of Condition 7 (Taxation)), any law implementing an intergovernmental approach thereto. No commissions or expenses shall be charged to the Noteholders in respect of such payments.
(e) Payments on business days
Where payment is to be made by transfer to a euro account (or other account to which euro may be credited or transferred), payment instructions (for value the due date, or, if the due date is not a business day, for value the next succeeding business day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed (i) (in the case of payments of principal and interest payable on redemption) on the later of the due date for payment and the day on which the relevant Note Certificate is surrendered (or, in the case of part payment only, endorsed) at the Specified Office of a Paying Agent and (ii) (in the case of payments of interest payable other than on redemption) on the due date for payment. A Holder of a Note shall not be entitled to any interest or other payment in respect of any delay in payment resulting from (A) the due date for a payment not being a business day or (B) a cheque mailed in accordance with this Condition 6 (Payments) arriving after the due date for payment or being lost in the mail. In this paragraph, "business day" means:
(i) in the case of payment by transfer to a euro account (or other account to which euro may be credited or transferred) as referred to above, any day which is a TARGET Settlement Day; and
(ii) in the case of surrender (or, in the case of part payment only, endorsement) of a Note Certificate, any day on which banks are open for general business (including dealings in foreign currencies) in the place in which the Note Certificate is surrendered (or, as the case may be, endorsed).
(f) Partial payments
If a Paying Agent makes a partial payment in respect of any Note, the Issuer shall procure that the amount and date of such payment are noted on the Register and, in the case of partial payment upon presentation of a Note Certificate, that a statement indicating the amount and the date of such payment is endorsed on the relevant Note Certificate.
(g) Record date
Each payment in respect of a Note will be made to the person shown as the Holder in the Register at the opening of business in the place of the Registrar's Specified Office on the fifteenth day before the due date for such payment (the "Record Date"). Where payment in respect of a Note is to be made by cheque, the cheque will be mailed to the address shown as the address of the Holder in the Register at the opening of business on the relevant Record Date.
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7. Taxation
All payments of principal and interest in respect of the Notes by or on behalf of the Issuer or the Guarantor shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Republic of Ireland or any political subdivision thereof or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event the Issuer or (as the case may be) the Guarantor shall pay such additional amounts as will result in receipt by the Noteholders of such amounts after such withholding or deduction as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note:
(a) held by a Holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note by reason of its having some connection with the jurisdiction by which such taxes, duties, assessments or charges have been imposed, levied, collected, withheld or assessed other than the mere holding of the Note; or
(b) where (in the case of a payment of principal or interest on redemption) the relevant Note Certificate is surrendered for payment more than 30 days after the Relevant Date except to the extent that the relevant Holder would have been entitled to such additional amounts if it had surrendered the relevant Note Certificate on the last day of such period of 30 days.
For the avoidance of doubt, no additional amount shall be payable where any withholding or deduction is required pursuant to an agreement described in section 1471(b) of the Code, or otherwise imposed pursuant to sections 1471 through 1474 of the Code and any regulations, agreements or undertakings thereunder or official interpretations thereof or similar law implementing an intergovernmental approach thereto.
In these Conditions, "Relevant Date" means whichever is the later of (1) the date on which the payment in question first becomes due and (2) if the full amount payable has not been received in a city in which banks have access to the TARGET System by the Principal Paying Agent or the Trustee on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders.
Any reference in these Conditions to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this Condition 7 (Taxation) or any undertaking given in addition to or in substitution of this Condition 7 (Taxation) pursuant to the Trust Deed.
If the Issuer or the Guarantor becomes subject at any time to any taxing jurisdiction other than the Republic of Ireland, references in these Conditions to the Republic of Ireland shall be construed as references to the Republic of Ireland and/or such other jurisdiction.
8. Events of Default
If any of the following events occurs, and (other than in the case of Condition 8(b)(i) (Breach of other obligations – incapable of remedy) or Condition 8(f) (Winding up)) is continuing, then the Trustee at its discretion may and, if so requested in writing by Holders of at least one quarter of the aggregate principal amount of the outstanding Notes or if so directed by an Extraordinary Resolution, shall (subject, in the case of the happening of any of the events mentioned in paragraph (b) (Breach of other obligations) below, to the Trustee having certified in writing that the happening of such event is in its opinion materially prejudicial to the interests of the Noteholders and, in all cases, to the Trustee having been indemnified and/or provided with security and/or prefunded to its satisfaction) give written notice to the Issuer declaring the Notes to be immediately due and payable, whereupon they shall become immediately due and payable at their principal amount together with accrued interest without further action or formality:
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(a) Non-payment:
the Issuer and the Guarantor each fail to pay any amount payable in respect of the Notes as and when such amount becomes payable provided that such failure to pay continues for more than seven days in the case of principal or 14 days in the case of interest; or
(b) Breach of other obligations:
the Issuer or the Guarantor defaults in the performance or observance of any of its other obligations under or in respect of the Notes or the Trust Deed and such default:
(i) is, in the opinion of the Trustee, incapable of remedy; or
(ii) being a default which is, in the opinion of the Trustee, capable of remedy, remains, unremedied for 30 days agree after the Trustee has given written notice thereof to the Issuer and the Guarantor; or
(c) Cross-default of Issuer or Guarantor:
(i) any indebtedness (other than the Notes) of the Issuer or the Guarantor for moneys borrowed is declared or becomes due and payable prior to its stated maturity as the result of any event of default (howsoever described) and the failure or default has not been waived by or on behalf of the relevant lender(s), and all applicable grace periods have expired;
(ii) any such indebtedness is not paid when due or, as the case may be, within any applicable grace period; or
(iii) the Issuer or the Guarantor fails to pay, within any applicable grace period therefor, any amount payable by it under any guarantee for, or indemnity in respect of, any moneys borrowed or raised;
provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned in this paragraph (c) will have occurred (which indebtedness, guarantees or indemnities have not been repaid or paid and as to which such default has not been cured or such acceleration has not been rescinded or annulled) exceeds EUR50,000,000 or its equivalent in other currencies; or
(d) Unsatisfied judgment:
one or more judgment(s) for the payment of any amount in excess of EUR50,000,000 (or its equivalent in any other currency or currencies, whether individually or in aggregate) is rendered against the Issuer, the Guarantor or any Material Subsidiary and continue(s) unsatisfied and unstayed for a period of 90 days after the date(s) thereof or, if later, the date therein specified for payment; or
(e) Insolvency, etc.
the occurrence of any of the following events:
(i) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Issuer or the Guarantor in an involuntary case or proceeding under any applicable Irish bankruptcy, insolvency, reorganisation or other similar law or (B) a decree or order adjudging the Issuer or the Guarantor bankrupt or insolvent, or approving as properly filed a petition seeking reorganisation, arrangement, adjustment or composition of or in respect of the Issuer or the Guarantor under any applicable Irish law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or the Guarantor or of any substantial part of their respective property, or ordering the winding up or liquidation of their respective affairs, and the continuance of any such
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decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; or
(ii) the commencement by the Issuer or the Guarantor of a voluntary case or proceeding under any applicable Irish bankruptcy, insolvency, reorganisation or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Issuer or the Guarantor in an involuntary case or proceeding under any applicable Irish liquidation, bankruptcy, insolvency, reorganisation or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganisation or relief under any applicable Irish law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or the Guarantor or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Issuer or the Guarantor in furtherance of any such action;
(iii) the Issuer, the Guarantor or any Material Subsidiary ceases or threatens to cease to carry on all or any substantial part of its business (otherwise than, in the case of a Material Subsidiary, (i) for the purposes of or pursuant to an amalgamation, reorganisation or restructuring whilst solvent, (ii) whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Issuer, the Guarantor, or any wholly-owned member of the Group), or (iii) as part of an arm's length sale for reasonable market value);
(f) Winding up, etc.:
an order is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer, the Guarantor or any Material Subsidiary (otherwise than, in the case of a Material Subsidiary, (i) for the purposes of or pursuant to an amalgamation, reorganisation or restructuring whilst solvent, (ii) whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Issuer, the Guarantor, or any wholly-owned member of the Group), or (iii) as part of an arm's length sale for reasonable market value); or
(g) Attachment:
any expropriation, attachment, sequestration, execution or distress is levied against, or an encumbrancer takes possession of or sells, the whole or any material part of, the undertaking, revenues or assets of the Issuer, the Guarantor of the Notes or any of their respective Subsidiaries unless the levy against such undertaking, revenues or assets is discharged or dismissed within 30 days; or
(h) Authorisations:
any consent, licence, approval, registration, recording or filing which is necessary for the performance of any obligation of the Issuer or the Guarantor under the Notes or the Guarantee of the Notes or for the validity or enforceability thereof fails to be in full force and effect, if such failure is not remedied within 30 days of its occurrence; or
(i) Failure to take action, etc.:
any action, condition or thing at any time required to be taken, fulfilled or done in order (i) to enable the Issuer and the Guarantor lawfully to enter into, exercise their respective rights and perform and comply with their respective obligations under and in respect of the Notes or the Trust Deed, (ii) to ensure that those obligations are legal, valid, binding and enforceable and (iii) to make the Note Certificates and the Trust Deed admissible in evidence in the courts of the Republic of Ireland or England is not taken, fulfilled or done; or
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(j) Unlawfulness:
it is or will become unlawful for the Issuer or the Guarantor to perform or comply with any of its obligations under or in respect of the Notes or the Trust Deed; or
(k) Guarantee of the Notes not in force:
the Guarantee of the Notes is not (or is claimed by the Guarantor not to be) in full force and effect; or
(l) Analogous event:
any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to above.
In these Conditions:
"Group" means the Guarantor and its Subsidiaries;
"Material Subsidiary" means at any time a Subsidiary of the Issuer or the Guarantor whose net assets exceed 15 per cent. of the Group's net assets as shown in the most recently published consolidated audited financials of the Group;
9. Prescription
Claims for principal and interest on redemption shall become void unless the relevant Note Certificates are surrendered for payment within ten years of the appropriate Relevant Date.
10. Replacement of Note Certificates
If any Note Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Registrar and the Transfer Agent having its Specified Office in Luxembourg, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Note Certificates must be surrendered before replacements will be issued.
11. Trustee and Agents
Under the Trust Deed, the Trustee is entitled to be indemnified and relieved from responsibility in certain circumstances and to be paid its costs and expenses in priority to the claims of the Noteholders. In addition, the Trustee is entitled to enter into business transactions with the Issuer, the Guarantor and any entity relating to the Issuer or the Guarantor without accounting for any profit.
In the exercise of its powers and discretions under these Conditions and the Trust Deed, the Trustee will have regard to the interests of the Noteholders as a class and will not be responsible for any consequence for individual Holders of Notes as a result of such Holders being connected in any way with a particular territory or taxing jurisdiction.
In acting under the Agency Agreement and in connection with the Notes, the Agents act solely as agents of the Issuer, the Guarantor and (to the extent provided therein) the Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders.
The initial Agents and their initial Specified Offices are listed below. The Issuer and the Guarantor reserve the right (with the prior approval of the Trustee) at any time to vary or terminate the appointment of any Agent and to appoint a successor registrar principal paying agent, agent bank and additional or successor paying agents and transfer agents.
Notice of any change in any of the Agents or in their Specified Offices shall promptly be given to the Noteholders.
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12. Meetings of Noteholders; Modification and Waiver; Substitution
(a) Meetings of Noteholders
The Trust Deed contains provisions for convening meetings of Noteholders to consider matters relating to the Notes, including the modification of any provision of these Conditions or the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the Issuer and the Guarantor (acting together) or by the Trustee and shall be convened by the Trustee (subject to it being indemnified and/or secured and/or prefunded to its satisfaction) upon the request in writing of Noteholders holding not less than one-tenth of the aggregate principal amount of the outstanding Notes. The quorum at any meeting convened to vote on an Extraordinary Resolution will be two or more persons holding or representing more than half of the aggregate principal amount of the outstanding Notes or, at any adjourned meeting, two or more persons being or representing Noteholders whatever the principal amount of the Notes held or represented; provided, however, that any proposal:
(i) to change any date fixed for payment of principal or interest in respect of the Notes or to reduce the amount of principal or interest payable on any date in respect of the Notes, or to alter the method of calculating the amount of any payment in respect of the Notes or the date for any such payment;
(ii) to effect the exchange, conversion or substitution of the Notes for, or the conversion of the Notes into, shares, bonds or other obligations or securities of the Issuer, the Guarantor or any other person or body corporate formed or to be formed (other than as permitted under Clause 17 of the Trust Deed);
(iii) to change the currency of payments under the Notes;
(iv) to modify the provisions of the Guarantee of the Notes; or
(v) to change the quorum requirements relating to meetings or the majority required to pass an Extraordinary Resolution,
(each, a "Reserved Matter") may only be sanctioned by an Extraordinary Resolution passed at a meeting of Noteholders at which two or more persons holding or representing not less than three- quarters or, at any adjourned meeting, one quarter of the aggregate principal amount of the outstanding Notes form a quorum. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders, whether present or not.
In addition, a resolution in writing signed by or on behalf of all Noteholders who for the time being are entitled to receive notice of a meeting of Noteholders under the Trust Deed will take effect as if it were an Extraordinary Resolution. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders.
(b) Modification and Waiver
The Trustee may, without the consent of the Noteholders, agree to any modification of these Conditions or the Trust Deed (other than in respect of a Reserved Matter) which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee, such modification will not be materially prejudicial to the interests of Noteholders and to any modification of the Notes or the Trust Deed which is of a formal, minor or technical nature or is to correct a manifest error.
In addition, the Trustee may, without the consent of the Noteholders, authorise or waive any proposed breach or breach of the Notes or the Trust Deed (other than a proposed breach or breach relating to the subject of a Reserved Matter) if, in the opinion of the Trustee, the interests of the Noteholders will not be materially prejudiced thereby.
Such authorisation, waiver or modification shall be notified to the Noteholders as soon as practicable thereafter.
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(c) Substitution
The Trust Deed contains provisions under which the Guarantor or any other company may, without the consent of the Noteholders, assume the obligations of the Issuer as principal debtor under the Trust Deed and the Notes provided that certain conditions specified in the Trust Deed are fulfilled, including, in the case of a substitution of the Issuer by a company other than the Guarantor, a requirement that the Guarantee of the Notes is fully effective in relation to the obligations of the new principal debtor under the Trust Deed and the Notes.
No Noteholder shall, in connection with any substitution, be entitled to claim any indemnification or payment in respect of any tax consequence thereof for such Noteholder, except to the extent provided for in Condition 7 (Taxation) (or any undertaking given in addition to or substitution for it pursuant to the provisions of the Trust Deed).
13. Enforcement
The Trustee may at any time, at its discretion and without notice, institute such steps, actions or proceedings as it thinks fit to enforce its rights under the Trust Deed in respect of the Notes, but it shall not be bound to do so unless:
(a) it has been so requested in writing by the Noteholders of at least one quarter of the aggregate principal amount of the outstanding Notes or has been so directed by an Extraordinary Resolution; and
(b) it has been indemnified and/or provided with security and/or prefunded to its satisfaction.
No Noteholder may proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound to do so, fails to do so within a reasonable time and such failure is continuing.
14. Further Issues
The Issuer may from time to time, without the consent of the Noteholders and in accordance with the Trust Deed, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes. The Issuer may from time to time, with the consent of the Trustee, create and issue other series of notes having the benefit of the Trust Deed.
15. Notices
Notices to the Noteholders will be sent to them by first class mail (or its equivalent) or (if posted to an overseas address) by airmail at their respective addresses on the Register. Any such notice shall be deemed to have been given on the fourth day after the date of mailing. In addition, notices to Noteholders shall be valid if published on the date of such mailing in a daily newspaper of general circulation in Dublin (which is expected to be The Irish Times) or in London (which is expected to be The Financial Times), or in such other manner as the stock exchange shall allow.
16. Governing Law and Jurisdiction
(a) Governing Law
The Notes and the Trust Deed and any non-contractual obligation arising out of or in connection with the Notes and the Trust Deed are governed by English law.
(b) Jurisdiction
Each of the Issuer and the Guarantor has in the Trust Deed (i) agreed for the benefit of the Trustee and the Noteholders that the courts of England shall have exclusive jurisdiction to settle any dispute (a "Dispute") arising out of or in connection with the Notes (including any non-contractual obligation arising out of or in connection with the Notes); (ii) agreed that those courts are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue that any other courts are more appropriate or convenient; and (iii) designated persons in England to accept service of any process on its behalf. The Trust Deed also states that nothing contained in the Trust Deed prevents the
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Trustee or any of the Noteholders from taking proceedings related to a Dispute ("Proceedings") in any other courts with jurisdiction and that, to the extent allowed by law, the Trustee or any of the Noteholders may take concurrent Proceedings in any number of jurisdictions.
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SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM
The Notes will be represented by a Global Note Certificate that will be registered in the name of a nominee for, and deposited with, the common safekeeper for Euroclear and Clearstream, Luxembourg.
In a press release dated 22 October 2008, "Evolution of the custody arrangement for international debt securities and their eligibility in Eurosystem credit operations", the European Central Bank announced that it has assessed the new holding structure and custody arrangements for registered notes which the international central securities depositaries had designed in cooperation with market participants and that Notes to be held under the new structure (the "New Safekeeping Structure" or "NSS") would be in compliance with the "Standards for the use of EU securities settlement systems in ESCB credit operations" of the central banking system for the euro (the "Eurosystem"), subject to the conclusion of the necessary legal and contractual arrangements. The press release also stated that the new arrangements for Notes to be held in NSS form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2010 and that registered debt securities in global registered form held issued through Euroclear and Clearstream, Luxembourg after 30 September 2010 will only be eligible as collateral in Eurosystem operations if the New Safekeeping Structure is used.
The Notes are intended to be held in a manner which would allow Eurosystem eligibility – that is, in a manner which would allow the Notes to be recognised as eligible collateral for Eurosystem monetary policy and intra- day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.
The Global Note Certificate will become exchangeable in whole, but not in part, for Individual Note Certificates if (a) Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention to permanently cease business or (b) any of the circumstances described in Condition 8 (Events of Default) occurs.
Whenever the Global Note Certificate is to be exchanged for Individual Note Certificates, such Individual Note Certificates will be issued in an aggregate principal amount equal to the principal amount of the Global Note Certificate within five business days of the delivery, by or on behalf of the registered Holder of the Global Note Certificate, Euroclear and/or Clearstream, Luxembourg, to the Registrar of such information as is required to complete and deliver such Individual Note Certificates (including, without limitation, the names and addresses of the persons in whose names the Individual Note Certificates are to be registered and the principal amount of each such person's holding) against the surrender of the Global Note Certificate at the Specified Office of the Registrar. Such exchange will be effected in accordance with the provisions of the Agency Agreement and the regulations concerning the transfer and registration of Notes scheduled thereto and, in particular, shall be effected without charge to any Holder or the Trustee, but against such indemnity as the Registrar may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such exchange.
In addition, the Global Note Certificate will contain provisions that modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the Global Note Certificate. The following is a summary of certain of those provisions:
Payments on business days: In the case of all payments made in respect of the Global Note Certificate, "business day" means any day on which the TARGET System is open.
Payment record date: Each payment in respect of the Global Note Certificate will be made to the person shown as the Holder in the Register at the close of business (in the relevant clearing system) on the Clearing System Business Day before the due date for such payment (the "Record Date") where "Clearing System Business Day" means a day on which each clearing system for which the Global Note Certificate is being held is open for business.
Exercise of put option: In order to exercise the option contained in Condition 5(c) (Redemption and Purchase - Redemption at the option of Noteholders following a change of control) the Holder of the Global Note Certificate must, within the period specified in the Conditions for the deposit of the relevant Note Certificate and Put Option Notice (as defined in Condition 5(c)) deliver the same to the Specified Office of any Agent. Any such notice will be irrevocable and may not be withdrawn.
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Exercise of call option: The Issuer may, unless a put option has been exercised, redeem all, but not some only, of the Notes in accordance with Condition 5(d) (Redemption at the Option of the Issuer (Issuer Maturity Par Call and Issuer Make-Whole Call)).
Notices: Notwithstanding Condition 15 (Notices), so long as the Global Note Certificate is held on behalf of Euroclear, Clearstream, Luxembourg or any other clearing system (an "Alternative Clearing System"), notices to Holders of Notes represented by the Global Note Certificate may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg or (as the case may be) such Alternative Clearing System.
Meetings: For the purposes of any meeting of Noteholders, the holder of the Notes represented by the Global Certificate shall (unless the Global Note Certificate represents only one Note) be treated as two persons for the purposes of any quorum requirements of a meeting of Noteholders and as being entitled to one vote in respect of each integral currency unit of the currency of the Notes.
Trustee's Powers: In considering the interests of Noteholders while the Global Note Certificate is held on behalf of, or registered in the name of any nominee for, a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Note Certificate and may consider such interests as if such accountholders were the holders of the Notes represented by the Global Note Certificate.
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USE OF PROCEEDS
The Group intends to use the proceeds from the issuance of the Notes for general corporate purposes, including the repayment of indebtedness to, among others, certain of the Managers (see further "Description of Existing Financing arrangements") and the funding of acquisitions in the ordinary course of business.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected historical financial information presented below as at and for the years ended 31 December 2018 and 2017 has been derived from the Group's audited consolidated financial statements as at and for the years ended 31 December 2018 and 2017, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, International Financial Reporting Interpretations Committee ("IFRIC") interpretations and those parts of the Companies Act 2014 applicable to companies reporting under IFRS, and are incorporated by reference in this Offering Circular.
This selected historical financial information presented below should be read in conjunction with, and is qualified in its entirety by reference to, the audited consolidated financial statements and the accompanying notes as at and for the years ended 31 December 2018 and 2017, which are incorporated by reference herein.
The financial information presented below also includes certain items not defined under IFRS and certain non- IFRS performance measures used by the Group's management as part of its overall assessment of the Group's consolidated and operating business performance. These measures are not recognised terms or measures under IFRS. Accordingly, they should not be used in isolation of comparable IFRS metrics. These measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Group's results reported under IFRS. In particular, these measures should not be considered as an alternative to (a) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of the Group's operating performance, (b) cash flows from operating, investing and financing activities as a measure of the Group's ability to meet its cash needs or (c) any other measures of performance under generally accepted accounting principles. Because the Group's definitions of these measures may differ from those used by other companies and industries, presentation of these metrics may not be comparable to other similarly-titled measures used by other companies. See "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures" for more information with respect to such items not defined under IFRS and non-IFRS measures.
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The following table sets out consolidated income statement information for the years ended 31 December 2018 and 2017:
Consolidated Income Statement Data
Year ended 31 December 2018 2017 (audited) (€ million) Continuing operations Revenue ...... 6,607.6 6,407.9 Trading profit(1) ...... 805.6 781.3 Intangible asset amortisation ...... (53.8) (47.9) Non-trading items(2) ...... (66.9) (54.5) Operating profit ...... 684.9 678.9 Finance income ...... 0.5 0.1 Finance costs ...... (67.5) (65.7) Profit before taxation ...... 617.9 613.3 Income taxes ...... (77.4) (24.8) Profit after taxation attributable to owners of the parent ...... 540.5 588.5 Adjusted earnings on a constant currency basis(3) ...... 624.4 574.0 Earnings per A ordinary share...... (€ cent) – basic ...... 305.9 333.6 – diluted ...... 305.7 333.2 – adjusted (basic)(4) ...... 353.4 325.4
______(1) Trading profit refers to the operating profit generated by the businesses before intangible asset amortisation and gains or losses generated from non-trading items. See "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures." Trading profit is stated after charging research and development costs of €274.6 million in 2018 and €268.7 million in 2017. (2) Non-trading items refers to gains or losses on the disposal of businesses, disposal of assets (non-current assets and assets classified as held for sale), costs in preparation of disposal of assets, material restructuring costs and material transaction, integration and restructuring costs associated with acquisitions. It is determined by management that each of these items relate to events or circumstances that are non-recurring in nature. (3) Adjusted earnings refers to profit after taxation attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax). Adjusted earnings on a constant currency basis refers to adjusted earnings impacted by retranslating prior year adjusted earnings at current year average exchange rates. Constant currency eliminates the translational effect that arises from changes in foreign currency year-on-year. It is determined by management that these items are excluded in order to assist in the understanding of underlying earnings. See "Presentation of Financial Information— Definitions of Items Not Defined Under IFRS and Non-IFRS Measures IFRS." The following table sets out a reconciliation of adjusted earnings on a constant currency basis to profit after taxation attributable to owners of the parent, the most directly comparable IFRS measure, for the years ended 31 December 2018 and 2017:
Year ended 31 December 2018 2017 (audited unless otherwise indicated) (€ million) Profit after taxation attributable to owners of the parent ...... 540.5 588.5 Brand related intangible asset amortisation ...... 28.8 23.6 Non-trading items (net of related tax) ...... 55.1 (10.2) Adjusted earnings ...... 624.4 601.9 Impact of retranslating prior year adjusted earnings at current year average exchange rates (unaudited) - (27.9) Adjusted earnings on a constant currency basis…………………………………….. 624.4 574.0
(4) Adjusted (basic) earnings per share refers to adjusted earnings on a constant currency basis as defined above divided by the basic weighted average number of shares in issue. See "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures."
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The following table sets out consolidated balance sheet information as at 31 December 2018 and 2017:
Consolidated Balance Sheet Data
As at 31 December 2018 2017 (audited) (€ million) Non-current assets Property, plant and equipment ...... 1,767.0 1,529.6 Intangible assets ...... 4,095.6 3,646.7 Financial asset investments ...... 35.3 44.6 Investment in associates and joint ventures ...... 15.6 5.8 Other non-current financial instruments ...... 101.7 95.4 Deferred tax assets ...... 37.1 46.4 6,052.3 5,368.5 Current assets Inventories...... 877.8 797.5 Trade and other receivables ...... 967.8 893.1 Cash at bank and in hand ...... 413.8 312.5 Other current financial instruments ...... 10.0 20.3 Assets classified as held for sale...... 2.0 8.3 2,271.4 2,031.7 Total assets 8,323.7 7,400.2
Current liabilities Trade and other payables ...... 1,482.1 1,410.5 Borrowings and overdrafts ...... 13.8 13.3 Other current financial instruments ...... 11.0 9.1 Tax liabilities...... 122.4 108.4 Provisions ...... 20.3 25.3 Deferred income ...... 1.2 1.2 1,650.8 1,567.8 Non-current liabilities Borrowings ...... 2,119.7 1,728.4 Other non-current financial instruments ...... 5.6 7.9 Retirement benefits obligation ...... 53.2 124.3 Other non-current liabilities ...... 82.6 96.7 Deferred tax liabilities ...... 324.1 241.9 Provisions ...... 32.1 37.1 Deferred income ...... 21.2 22.9 2,638.5 2,259.2 Total liabilities 4,289.3 3,827.0 Net assets 4,034.4 3,573.2 Issued capital and reserves attributable to owners of the parent Share capital ...... 22.0 22.0 Share premium ...... 398.7 398.7 Other reserves ...... (207.3) (214.4) Retained earnings ...... 3,821.0 3,366.9 Shareholders' equity ...... 4,034.4 3,573.2
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The following table sets out consolidated cash flow statement information for the years ended 31 December 2018 and 2017:
Consolidated Statement of Cash Flows Data
Year ended 31 December 2018 2017 (audited) (€ million) Operating activities Trading profit ...... 805.6 781.3 Adjustments for: Depreciation (net)...... 134.1 134.0 Change in working capital ...... (78.8) 9.1 Pension contributions paid less pension expense ...... (40.0) (95.3) Payments on non-trading items ...... (59.8) (34.0) Exchange translation adjustment ...... 0.5 (8.8) Cash generated from operations 761.6 786.3
Income taxes paid ...... (46.1) (54.7) Finance income received ...... 0.5 0.1 Finance costs paid ...... (65.0) (60.3) Net cash from operating activities 651.0 671.4 Investing activities Purchase of assets (net) ...... (296.1) (301.3) Proceeds from the sale of assets ...... 10.6 3.1 Capital grants received ...... - 0.9 Purchase of businesses (net of cash acquired) ...... (476.8) (396.5) (Purchase)/disposal of share in associates and joint ventures (14.5) 29.5 Income received from associates and joint ventures ...... - - Disposal of businesses ...... - - Payments relating to previous acquisitions ...... (11.9) (0.9) Net cash used in investing activities (788.7) (665.2) Financing activities Dividends paid ...... (114.4) (102.2) Issue of share capital ...... - - Net movement on borrowings (net of swaps) ...... 350.2 (144.3) Net cash movement due to financing activities 235.8 (246.5) Net increase/(decrease) in cash and cash equivalents ...... 98.1 (240.3) Cash and cash equivalents at beginning of the financial year ...... 305.6 561.1 Exchange translation adjustment on cash and cash equivalents ...... 0.2 (15.2) Cash and cash equivalents at end of the financial year……………………………………… 403.9 305.6 Reconciliation of Net Cash Flow to Movement in Net Debt Net increase/(decrease) in cash and cash equivalents ...... 98.1 (240.3) Cash flow from debt financing ...... (350.2) 144.3 Changes in net debt resulting from cash flows ...... (252.1) (96.0) Fair value movement on interest rate swaps (net of adjustment to borrowings) ...... (2.6) 2.8 Exchange translation adjustment on net debt...... (27.1) 75.2 Movement in net debt in the financial year ...... (281.8) (18.0) Net debt at beginning of the financial year ...... (1,341.7) (1,323.7) Net debt at end of the financial year (1,623.5) (1,341.7)
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The following table sets out certain other financial data for the years ended 31 December 2018 and 2017:
Other Financial Data
As at and for the year ended 31 December 2018 2017 (audited unless otherwise indicated) Free cash flow(1) (€ million) (unaudited) ...... 446.5 501.3 EBITDA (before non-trading items)(2) (€ million) ...... 942.0 917.5 Adjusted EBITDA(3) (€ million) (unaudited) ...... 971.3 943.9 Net debt(4): Adjusted EBITDA (times) ...... 1.7x 1.4x Trading profit margin(5) ...... 12.2% 12.2% Cash Conversion(6) ...... 72% 83%
Table 1 Year ended 31 December 2018 2017 (audited unless otherwise indicated) (€ million) Net cash from operating activities ...... 651.0 671.4 Difference between movement in monthly average working capital and movement in the financial year end working capital (unaudited)(7) ...... 21.7 84.4 Expenditure on non-trading items ...... 59.8 34.0 Purchase of assets ...... (296.1) (301.3) Proceeds from the sale of property, plant and equipment ...... 10.6 3.1 Capital grants received ...... - 0.9 Exchange translation adjustment ...... (0.5) 8.8
Free cash flow (unaudited) ...... 446.5 501.3
Table 2 Year ended 31 December 2018 2017 (audited unless otherwise indicated) (€ million) Trading profit ...... 805.6 781.3 Depreciation (net)...... 134.1 134.0 Movement in average working capital (7) (unaudited) ...... (57.1) 93.5 Pension contributions paid less pension expense ...... (40.0) (95.3) Finance costs paid (net) ...... (64.5) (60.2) Income taxes paid ...... (46.1) (54.7) Purchase of non-current assets (net) ...... (285.5) (297.3)
Free cash flow (unaudited) ...... 446.5 501.3
Table 3 Year ended 31 December 2018 2017 (audited unless otherwise indicated) (€ million) Profit after taxation attributable to owners of the parent ...... 540.5 588.5 Finance income ...... (0.5) (0.1) Finance costs ...... 67.5 65.7 Income taxes ...... 77.4 24.8 Non-trading items...... 66.9 54.5 Intangible asset amortisation ...... 53.8 47.9 Depreciation (including impairment) ...... 136.4 136.2 EBITDA (before non-trading items) ...... 942.0 917.5 Adjustment to reflect management's estimate of the contribution of acquisitions and disposals (unaudited) ...... 29.3 26.4 Adjusted EBITDA (unaudited) ...... 971.3 943.9
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As at and for the year ended 31 Table 4 December 2018 2017 Free cash flow (€ million) (unaudited) ...... 446.5 501.3 Adjusted earnings after tax (€ million) (unaudited) ...... 624.4 601.9 Cash Conversion(6) ...... 72% 83%
(1) Free cash flow refers to net cash from operating activities before expenditure on non-trading items and exchange translation adjustment less purchases of non-current assets plus proceeds from the sale of property, plant and equipment and capital grants received. See "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures."
Table 1 sets out a reconciliation of free cash flow to net cash from operating activities, the most directly comparable IFRS measure, for the years ended 31 December 2018 and 2017.
Table 2 sets out a reconciliation of free cash flow to trading profit plus depreciation, movement in average working capital, capital expenditure, pensions costs less pension expense, finance cost paid (net) and income taxes paid.
(2) EBITDA (before non-trading items) refers to profit after taxation and attributable to owners of the parent before finance income and costs, income taxes, depreciation (including impairment), intangible asset amortisation and non-trading items. See "Presentation of Financial Information—Definitions of Items not Defined Under IFRS and Non-IFRS Measures." See Table 3 for a reconciliation of EBITDA (before non-trading items) to profit after taxation and attributable to owners of the parent, the most directly comparable IFRS measure.
(3) Adjusted EBITDA refers to profit after taxation and attributable to owners of the parent before finance income and costs, income taxes, depreciation (including impairment), intangible asset amortisation and non-trading items, with an adjustment to reflect management's estimate of the EBITDA of any acquisitions and disposals during the relevant period calculated as if such acquisitions or disposals had occurred on the first day of such period. See "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures."
Table 3 sets out a reconciliation of adjusted EBITDA to profit after taxation and attributable to owners of the parent, the most directly comparable IFRS measure, for the years ended 31 December 2018 and 2017.
(4) Net debt for purposes of the financial covenants in the 2010 Notes (as defined below in "Description of Existing Financing Arrangements") is net debt as reported (borrowings and overdrafts less interest rate swaps and cash at bank and in hand) plus interest rate swaps and deferred purchase price consideration and excluding any adjustments in respect of the 2010 Notes, the 2013 Notes, the 2015 Notes and interest rate swaps made pursuant to IFRS 9 (Financial Instruments). See "Capitalisation" and "Description of Existing Financing Arrangements."
(5) Trading profit margin refers to trading profit expressed as a percentage of revenue.
(6) Cash conversion is defined as free cash flow, expressed as a percentage of adjusted earnings after tax.
(7) Movement in average working capital is used when calculating free cash flow as management believes this provides a more accurate measure of the increase or decrease in working capital needed to support the business over the course of the year rather than at two distinct points in time. Movement in average working capital measures more accurately fluctuations caused by seasonality and other timing factors.
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BUSINESS DESCRIPTION
Overview of the Issuer
History
Kerry Group Financial Services (the "Issuer") is a public unlimited company, incorporated on 29 December 1995 in the Republic of Ireland as Golden Vale Financial Services. It was re-named as Kerry Group Financial Services on 17 February 2003 and re-registered as a public unlimited company on 29 April 2003. The Issuer is registered under company number 242662.
The Issuer's registered address is Prince's Street, Tralee, County Kerry, Ireland, and its telephone number is +353 66 718 2000.
The Issuer is indirectly wholly-owned and controlled by the Guarantor. Other than general corporate governance provisions, there are no specific measures in place to ensure this control is not abused.
Principal Activities
The Issuer's principal activity is providing treasury services to the Group, which include:
• raising finance from debt markets;
• hedging foreign exchange exposure of the Group;
• hedging interest rate exposure of the Group;
• inter-company lending; and
• management of the Group's daily liquidity, including the provision of netting and pooling arrangements.
Share Capital
As at the date of this Offering Circular, the Issuer has a total of 4,280,612 shares and its share capital is EUR 5,350,765.
The Issuer's shares are not listed on any stock exchange and are not traded on any other recognised market.
The Issuer has no Subsidiaries, but has a 49% shareholding in Tacna Investments Limited. For further information on the Group entities, see "Key Operations of the Group" below.
Administrative, Management and Supervisory Bodies
The directors of the Issuer at the date hereof are as follows:
Name Position Declan Crowley Director
Cathal Gunton Director
Ronan Deasy Director
Marguerite Larkin Director
There are no potential conflicts of interest of the directors referred to above between any duties to the Issuer and their private interests and/or other duties.
Financial statements
No financial information for the Issuer is presented in this Offering Circular. The financial information presented in this Offering Circular is the historical audited consolidated financial information of the Group.
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Overview of the Group
Kerry Group plc (the "Guarantor") is a public limited company, incorporated on 23 December 1985 in the Republic of Ireland. The Guarantor is registered under company number 111471.
The Guarantor's registered address is Prince's Street, Tralee, County Kerry, Ireland, and its telephone number is +353 66 718 2000.
The Guarantor is the ultimate parent company of the Group.
Kerry Group is one of the world's leading producers of taste and nutrition systems and functional ingredients and actives for the global food, beverage and pharmaceutical industries, and is a leading supplier of chilled consumer foods in the UK and Ireland and selected international markets.
From the commissioning of its first dairy and ingredients plant in Listowel, Ireland, in 1972, the Group has grown organically and through strategic acquisitions to become one of the largest and most technologically advanced manufacturers of ingredients and flavours in the world. Spanning all major food and beverage categories, the Group's core technologies and global resources provide innovative, practical ingredients and flavour solutions to food, beverage and pharmaceutical manufacturers. The Group has grown organically and through strategic acquisitions to become a leading producer of chilled consumer foods in the UK and Ireland, with a product portfolio that includes a number of well-known brands that occupy leading market positions in their respective categories.
The Group supplies over 15,000 food, food ingredients and flavour products to business customers in more than 140 countries worldwide. It has established 147 manufacturing facilities across 32 different countries and international sales offices in 12 other countries across the globe. Headquartered in Tralee, Ireland, the Group employs over 25,000 people throughout its manufacturing, sales and technology centres across Europe, North America, South America, Australia, New Zealand, Asia and Africa.
The Group has two businesses:
• Taste & Nutrition, which provides a portfolio of taste and nutrition systems and functional ingredients and actives for the global food, beverage and pharmaceutical industries; and
• Consumer Foods, which is a manufacturer and marketer of added-value branded and customer branded chilled foods to the UK, Irish and selected international markets.
The Group provides integrated, customer-focused product development and is continuously developing new products in order to meet changing consumer preferences, working closely with its customers to meet their specific requirements. The Group aims to continue to enhance its position as one of the world's leading global food taste and nutrition suppliers and to further develop its consumer foods business in Ireland and the UK through a commitment to excellence, technological creativity, overall quality and superior customer service.
In 2018, the Group recorded revenue of €6,607.6 million, a trading profit of €805.6 million and profit after taxation before non-trading items of €595.6 million (2017: €6,407.9 million, €781.3 million and €578.3 million, respectively).
Strengths
Highly Diversified and Defensive Business Model
The Group has a diversified business model, with its global Taste & Nutrition business, which operates in higher-growth product markets characterised by product innovation and its consumer foods business, which is cash-generative and provides a source of consumer insight for the Group's Taste & Nutrition business. The Taste & Nutrition business, which accounted for 80% of the Group's external revenue and 89% of its trading profit (before central costs) in 2018 (2017: 79% and 88.%, respectively), has a diversified product portfolio, supplying more than 15,000 products to a wide range of food and beverage manufacturers and foodservice companies, as well as pharmaceutical companies, in more than 140 countries around the world for end-use applications across all major food and beverage categories and in a limited number of pharmaceutical applications. The products supplied by the Taste & Nutrition business tend to be customer-specific and difficult to replicate and are generally integral to the customer product in which they are incorporated, all of which help to provide the Group with a competitive advantage. The Consumer Foods business, which accounted for 20%
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of the Group's external revenue and 11% of its trading profit (before central costs) in 2018 (2017: 21% and 12%, respectively), supplies a combination of added-value branded and customer branded chilled foods to major supermarket chains, discounter chains and independent retailers mainly in the UK and Ireland.
Market Leading Positions and Strong Brands
The Group is of the opinion that its businesses have obtained leading market positions in several of the markets in which it is active.
The Taste & Nutrition business is a market leader both regionally and globally as outlined in the table below.
Product Group Product Sub-groups
• Savoury & Dairy Flavour Solutions Savoury & Dairy • Dairy Ingredients • Culinary Sauces • Culinary Ingredients • Snack Seasonings • Meat Coating Systems • Functional Meat Systems
Cereal & Sweet • Sweet Flavours • Confections & Coated Sweets • Sweet Particulates • Chocolate & Compounds • Cereal Shapes & Agglomerates • Baked & Dough Sweet Products • Wet Sweet Systems
Beverage • Beverage Flavour Solutions • Sauces & Syrups • Tea & Coffee Concentrates • Beverage Ingredients & Extracts • Creamers & Whips
• Enzymes Functional • Fermented Ingredients Ingredients & • Protein Fractions Nutrition • Prebiotics, Probiotics & Metabolites • Nutritional Beverages • Nutrition Solutions • Emulsifiers & Texturants
• Pharma Excipients Pharma • Cell Nutrition Proteins • Media Ingredients
Source: Kerry Group plc
The Consumer Foods business's brands hold leading market positions in their respective sectors as seen in the table below.
Segment Market Position
Everyday Fresh • #1 Sausage Brand in UK (Richmond) (Meat and Dairy) • #2 Sausage Brand in Ireland (Denny) • #1 Cooked Meats Brand in Ireland (Denny) • #1 Cheese Brand in Ireland (Charleville)
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Convenience Meal Solutions • Leading UK Customer Brand Convience Meal Solutions Food to Go • Leading Snacking Brands in the UK - Meats Snack Brand (Mattessons Fridge Raiders) and Kids Cheese Snack Brand in UK (Cheesestrings)
Source: UK: as per IRI as of June 2019. Island of Ireland as per Nielsen as of June 2019.
High Quality and Longstanding Customer Relationships
Building on its four decades of experience in the food and beverage industry, the Group has developed long- standing and collaborative relationships with the world's major food and beverage manufacturers and foodservice companies, as well as major supermarket chains and independent retailers in the UK and Ireland. In 2018, the Taste & Nutrition business counted 87 of the top 100 (by revenue) food and beverage companies worldwide as active customers. Its longstanding relationships, some of which have been in existence for more than 25 years, and extensive technological breadth, applications expertise and culinary leadership, which enable it to provide customer-specific solutions, have led to it attaining preferred supplier status with many of its customers. The Consumer Foods business has developed strong relationships with the major supermarket chains and various independent retailers in the UK and Ireland, building on its ability to respond creatively to the needs and requirements of its customers and match ever-changing consumer demands.
Global Franchise Combining End-Market Understanding, Technological Expertise and Flexible Manufacturing
The Group's experience in the food and beverage industry has provided it with an extensive understanding of the end-markets for its products as well as expertise in the technologies required to produce them. For example, the Group's market intelligence teams track and interpret emerging global trends and provide its customers with information to help them shape their product portfolios, while the production and supply of the Group's taste and nutrition products requires the ability to use a variety of different production processes, such as encapsulation and fermentation, and delivery formats, such as shelf stable (dry) or frozen. Using its network of technology and innovation centres and regional development and application centres, which together employ approximately 900 scientists and food science specialists, the Group is able to combine different individual components to produce new solutions for customers that draw on the full range of its technological expertise, and allow it to cross-sell products from other technology areas to existing customers. The Group's global footprint, which includes manufacturing facilities in 32 countries and international sales offices in an additional 12 countries, provides its taste and nutrition business with a broad geographic reach, capable of serving the evolving requirements of customers in more than 140 countries across the globe. The Group's broad-based geographic footprint and continuous improvement initiatives with respect to its processes have provided it with a flexible manufacturing base, able to respond to the evolving needs of its customers.
Solid Track Record and Strong Cash Generation
Since its flotation in 1986, the Group has had substantial revenue and trading profit growth, with the latter increasing each year without interruption since that year. In 2017 the trading profit growth was 4.2% and in 2018, 3.1%. Over the last two years, the Group's trading profit has increased by €56.0 million, from €749.6 million in 2016 to €805.6 million in 2018. The Group's business is also cash-generative, with €446.5 million of free cash flow (see "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures") generated in 2018 (2017: €501.3 million), reflecting the Group's strong focus on working capital management. The Group's dividend pay-out ratio, which the Group defines as the dividend per share divided by adjusted (basic) earnings per share (see "Presentation of Financial Information—Definitions of Items Not Defined Under IFRS and Non-IFRS Measures"), has averaged 18.5% over the last three years.
Financial Ratios Well Within Financial Covenants
As the Group is required to comply with certain financial covenants under the 2010 Notes (see "Description of Existing Financing Arrangements"), it sets strict financial ratio targets based on these covenants and monitors them closely for compliance with such covenants. The Group's key financial covenants require that: (i) the ratio of net debt to adjusted EBITDA must be less than or equal to 3.5:1.0 and (ii) the ratio of adjusted EBITDA to net interest charges must be more than or equal to 4.75:1.0. The Group's financial ratios have been well within its financial covenants in each of the last three years. As at 31 December 2018, its net debt to adjusted EBITDA
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ratio was 1.7:1.0 (2017: 1.4:1.0) and its adjusted EBITDA to net interest charges ratio was 14.7:1.0 (2017: 16.2:1.0). The Group believes it has maintained its financial ratios at prudent levels.
Strategy
Taste & Nutrition Strategic Priorities
Focus on Technology and Innovation – Particularly Taste and Nutrition
The Group is focused on technology and innovation, particularly in the areas of authentic taste and nutrition, wellness and functionality as increasing consumer awareness of health and wellness issues continues to drive demand for nutritious products. For example, the Group's technology and innovation activities continue to be driven by increased consumer demand for "free-from" foods, meat alternatives and reduced calorie, reduced sugar, reduced salt, reduced fat, and high fibre products, as well as natural flavours and ingredients, and enhanced nutritional and dietary products. Continuing trends towards more convenient, cost-effective solutions, healthy snacking options, along with the rise of foodservice, out of home, digital, and home delivery also drive the Group's technology and innovation activities.
Accelerate Growth in Developing Markets
The Taste & Nutrition business intends to continue to expand its presence in developing markets by partnering more closely with food and beverage manufacturers in these regions and seeking out strategic acquisition opportunities to accelerate its growth in these regions. In 2018, 27% (€1.4 billion) of the Taste & Nutrition business's revenue was generated in developing markets and the Group expects demand for its products from developing markets in the Asia-Pacific, Middle East and Africa (APMEA), Latin America and Europe regions to grow over the medium-term as food and beverage manufacturers respond to increases in consumer spending and changes in consumer preferences in these regions. It is expected that consumers in developing markets will increasingly demand the same level of convenience and food safety with respect to their food and beverage purchases as is currently the case in developed markets. The Group therefore believes there are significant growth opportunities in these markets and intends to take advantage of them by capitalising on its global brand recognition, purchasing power and technological capabilities.
Foodservice
The Group has an unrivalled position as a partner to the foodservice channel. The breadth of the Group’s offering and depth of capabilities allows customers to work with the Group right across their menu, both in enhancing the taste proposition and improving the nutritional value and functionality of their products. The Group is of the opinion that there is significant opportunity for growth by embedding our cross functional teams within our customers’ innovation and culinary development processes, enabling them to enhance the taste, nutritional value and functionality of their products.
Consumer Foods – Strategic Priorities
Focus on Growing Ahead of the Market, Cost Efficiencies and Cash Generation
It is the view of Kerry’s management that the Consumer Foods business is a leader in the chilled foods’ categories in the UK and Ireland. The Group's strategic priority is to continue to drive growth in the Group's core business by responding to key consumer trends in meat, meals and dairy, while also leveraging this core expertise in developing and expanding adjacent categories. Adjacent categories include snacking, out-of-home and food-to-go solutions which are driven by new consumption occasions, new channels and a broader customer base.
Continue to Seek Out Investment Opportunities
The Group's long and extensive acquisition history has provided it with significant experience and expertise at generating value from acquisitions. The Group's policy is to fund these transactions from operating cash flows or borrowings while maintaining its investment grade debt status. This acquisition strategy is managed by setting net debt to adjusted EBITDA targets while allowing flexibility to accommodate acquisition opportunities. Any potential variation from these targets would be expected to be reversed within eighteen to twenty-four months. In line with this acquisition strategy, during the six month period ending 30 June 2019, the Group completed three acquisitions at a total cost of €327.2million. The Group continues to explore
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opportunities for potential new acquisitions on an on-going basis and may engage in discussions with potential vendors to pursue its acquisition strategy.
Towards 2020 Sustainability Programme
The Group's "Towards 2020 Sustainability Programme" reflects the Group's vision for making the world of food, beverage and pharma better. Launched in 2015, the programme builds on previous initiatives and reflects the Group's heritage as a farmer cooperative. The Towards 2020 Sustainability Programme prioritises the most material issues for the Group. The Group has examined the ways in which it can reduce the adverse environmental impacts and identified where its skills and support can make a positive difference. The Group has set measurable targets for improvement in the areas set out below over a five-year period. As the Group enters the final year of its programme in 2019, the Group is well positioned to deliver on these targets although there can be no assurance that such targets will indeed be met. A fundamental pillar of the Towards 2020 Sustainability Programme is focussed on reducing the environmental impact from the Group’s operations which the Group has further sub-categorised in the following manner.
(a) Reducing Emissions:
As part of the Group's ongoing commitment on carbon, the Group tracks and reports its emissions footprint. In 2015, the Group set a target for a 13% reduction across Scope 1 and Scope 2 emissions. Scope 1 emissions consist of fuel and fugitive emissions. No process emissions are generated. Scope 2 emissions consist of electricity consumption by sites from the Group's activities. The Group measures and reports performance in accordance with the "GHG Protocol" which sets the global standard for how to measure, manage and report greenhouse gas emissions and the Group's data is independently assured to AA1000AS (2008).
The Group notes that in 2018 it surpassed its 2020 carbon target, a year ahead of schedule, with a 16.4% reduction versus its 2013 base year. These savings have been delivered through an ongoing focus on energy efficiency and the delivery of capital projects with significant carbon reduction potential.
(b) Using Water Efficiently:
The Group strives to manage its water use as efficiently as possible, especially in water stressed areas and its stated goal is to reduce the amount of water usage by 7% by 2020, versus a 2013 baseline. The Group also ensures that it protects natural water sources by meeting local requirements around waste water that leaves the Group's sites. In 2018, the Group made further progress against its target with a 6.6% reduction in water intensity, delivering close to the Group's 2020 goal. In the remainder of 2019, the Group will continue to pursue opportunities for greater water efficiency to ensure it meets its 2020 reduction target.
The Group also continues to view its water footprint within the wider context of global water risk. Given the uneven distribution of water resources, some of its locations are potentially more challenged by water stress. To help determine how increasing competition for scarce water resources may impact the Group, the Group uses the World Resources Institute’s Aqueduct Tool to help in its assessment of such footprint. With the aid of this tool, the Group has identified nine locations globally that are priority water sites and maintains a careful focus on water use at these facilities and its efficiency across these locations significantly exceeds that for the Group as a whole. The Group understands, however, that absolute water withdrawal is the key metric in these locations and across relevant sites the Group continues to make progress in reducing these volumes. In 2018, total water withdrawals across the nine sites reduced by 24.6%, versus a 2013 base year.
(c) Generating Less Waste:
Across the Group's sites, the Group is exploring ways to reduce, reuse and recycle materials. Where there is generation of waste material, the Group seeks to find ways in which this can be utilised elsewhere. In 2018, 90% of this waste was diverted from landfill and towards other productive uses. Overall, the Group has reduced waste to landfill by 30.2% versus a 2013 base year. Furthermore, as a producer of branded goods and private label, the consumer foods division, Kerry Foods, uses plastic packaging in its customer offerings. In 2018, Kerry Foods undertook significant work to understand its plastics footprint and through membership of the UK Plastics Pact, has set a target for 100% of its plastic packaging to be reusable, recyclable or compostable by 2025, although there can be no assurance that such a target is achievable. Overall, the Group continues to make progress on waste reduction having set itself a goal of a 12% reduction by 2020, versus a 2013 base year. In 2017, the Group surpassed that target and last year it continued the momentum, realising a 22.7% reduction against a 2013 base year. The Group remains committed to further reducing its waste volumes as it enters the
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final year of its programme and the Group continues to look at how it can capture greater value from these waste streams.
Group History and Acquisitions
The Group's history can be traced back to 1972, when a group of eight local farming co-operatives in Co. Kerry, Ireland joined together with the state-owned Dairy Disposal Company and U.S.-based Erie Casein Company Inc. to finance a dairy processing facility for the manufacture of milk protein (casein) for export to the United States. Following Ireland's entry into the European Economic Community in 1973, the Dairy Disposal Company and six of the eight local farming co-operatives were acquired by Kerry Co-operative Creameries Ltd ("KCC"), a company that had been formed for that purpose by local milk suppliers. KCC gradually expanded its milk business, acquiring several other dairies in Ireland before buying out the Erie Casein Company Inc.'s interest in the enterprise in 1983.
In the early 1980s, KCC decided to diversify its activities so as to be less dependent on the milk business, and KCC made its first acquisition outside the dairy industry in 1982 when it acquired the Denny pork and savoury products business in Ireland. In order to provide the capital required for further diversification and expansion into food ingredients, which had been identified by KCC's management as a high-growth sector, KCC's shareholders approved a plan for KCC to seek additional financial investors and change its structure. Accordingly, Kerry Group plc was created to acquire the undertaking, property and assets of KCC in return for 90 million ordinary shares in Kerry Group plc. An initial public offering of Kerry Group plc followed in 1986, and the Group made its first significant food ingredients acquisition in 1988 when it acquired Beatreme Food Ingredients ("Beatreme"), a division of Beatrice Corporation, a premier specialty food ingredient supplier in the United States, for US$130 million. KCC continues to remain a substantial shareholder in the Group. See "Substantial Shareholders and Related Party Transactions."
The Beatreme acquisition provided a platform for the Group in the taste and nutrition market and further acquisitions in the United States and Europe followed in the 1990s, including the 1994 acquisitions of DCA Food Industries and Margetts Foods from Allied Domecq plc for US$402 million and the 1998 acquisition of the food ingredients division of Dalgety in Europe for €396 million, as well as a number of smaller acquisitions around the world.
In the period since 2000, the Group has completed over 180 acquisitions significantly developing its foundational technology portfolio and increasing its presence in developing markets and its foodservice channel. In particular, between 2015 and 2018 the Group made 19 acquisitions in flavours for a total of €1,510.1 million and 12 other acquisitions for a total of €299.5 million.
In total, the Group has acquired approximately 194 ingredients, flavours and foodservice businesses and 30 food businesses since its flotation in 1986. The Group has an extensive and strong track record of successfully integrating acquisitions, ensuring that the value and opportunity for growth identified is obtained.
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Key Operations of the Group
The map below shows the locations of the key operations of the Group.
Naas, Kildare, Ireland Global Technology & Innovation Centre
Tralee, Co. Kerry, Ireland Corporate Headquarters
Beloit, Wisconsin, U.S. Global Technology & Innovation Centre
For a full list of the Group Subsidiaries see note 36 to the audited consolidated financial statements (including the auditors' report thereon and notes thereto) of the Guarantor as at and in respect of the year ended 31 December 2018.
Businesses
Taste & Nutrition
Taste & Nutrition provides a portfolio of taste and nutrition systems and functional ingredients & actives for the global food, beverage and pharmaceutical industries. Its formulations are used in many of the world's best- known consumer products and are designed to impart particular characteristics to a broad range of food, beverage and pharmaceutical end-products.
Food taste and nutrition are central to the flavour, texture, appearance, aroma and performance of food and beverage products. As such, taste and nutrition can serve as catalysts in driving the development of new menu items and more varied and interesting products. The Taste & Nutrition business develops targeted, value-added solutions and offers customer-specific product and application characteristics and effects that are tailored to its customers' individual requirements, whether they be enhanced flavour, texture, convenience, appearance, functionality, nutrition, value or compliance with food safety requirements.
Because the Group believes that responding creatively to customers' needs is essential to its success, it works in partnership with its customers to develop new products, processes and solutions that can better respond to specific requirements and particular problems. The business's approach to customised innovation and product solutions is supported by its market knowledge, technology, culinary, sensory, application and processing expertise and is designed to create value for its customers.
The structure of Kerry’s Taste & Nutrition business is designed first and foremost to enable the business to pre- empt and respond with speed and efficiency to customer needs, as well as make it easy for customers to interact with the business in a collaborative way. The Taste & Nutrition business is organised into eight end-use markets, see table below:
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Sub End-Use Markets End-Use Market
Tea, Coffee & Cocoa, Refreshing Beverages, Nutritional Beverages and (i) Beverages Alcoholic Beverages
(ii) Meat Meat and Meat Alternatives
(iii) Meals Meals and Side Dishes, Soups, Sauces and Dressings (Condiments)
(iv) Bakery & Confectionery Bakery, Confectionery and Bars
(v) Cereal & Sweet Cereal and Sweet
(vi) Dairy Dairy Beverages, Ice Cream and Desserts
(vii) Snacks Appetisers and Savoury Snacks
(viii) Pharma Nutraceuticals, Supplements and Pharma Excipients
Through these end-use market clusters the Group supplies a broad range of different products across all food and beverage groups, combining products from different areas into new solutions and cross-selling across its product range more effectively. Taking advantage of its deep understanding of end-use applications, the Taste & Nutrition business acts as more than an "off-the-shelf" ingredient supplier, using its innovation capabilities to produce customer-specific integrated solutions, creating value for customers by way of new products, product improvements, cost reductions or process development.
In 2018, the Taste & Nutrition business recorded revenue of €5,350.6 million and a trading profit of €805.3 million (2017: €5,158.8 million and €767.2 million, respectively). Regional revenue was well spread across the three regions – Americas 52% / Europe 27% / APMEA 21% (2017: Americas 53% / Europe 27% / APMEA 20%).
Products
The Taste & Nutrition business supplies a wide range of ingredients, flavours and integrated solutions that are tailored to the needs of its customers and provide the components needed to speed product development and reduce manufacturing investment. These products are sold to customers around the world.
The Group's broad technology portfolio of taste & nutrition products includes traditional flavours, which are generally extracted from natural sources, such as plant and animal products, and functional ingredients and actives, which provide food and beverage products with specific characteristics other than flavour, such as texture, emulsification, aeration, foaming, solubility, microwaveability or freeze/thaw capacity. Production yield, colour, shelf-life and food quality assurance may also be significantly improved by the inclusion of specific functional ingredients. Recent developments in this area have resulted in a significant increase in demand for ingredients that provide health benefits beyond basic nutrition and facilitate clean label declarations. Such functional ingredients, or bio-active components, may improve health, satiety control or help reduce the risk of certain diseases. Specific developments include protein or fibre enrichment, vitamin or mineral fortification, cholesterol reduction, antioxidant consumption or enrichment with essential fatty acids. The Group is also able to combine different technologies into customer-specific solutions.
Using a combination of its technological expertise and applications experience, the Group has developed a diversified taste and nutrition portfolio that includes over 15,000 products across its eight end-use markets.
Markets and Customers
The Taste and Nutrition business operates in the global ingredients and flavours market. This market, which the Group estimates to have a size of US$75 billion in terms of sales, supplies food and beverage manufacturers and foodservice companies with the ingredients and flavours they need to produce end-products such as packaged foods and beverages, which are then sold to consumers in the food and beverages market. The Taste
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and Nutrition business's competitors include the ingredients and flavour divisions of major international flavour and fragrance and food manufacturers, including , Givaudan SA, International Fragrances & Flavours Inc. and Symrise AG.
The taste and nutrition market is characterised by the existence of a large variety of specialised products, which are often manufactured according to the particular requirements of individual customers or customer groups. This variety has resulted in the market for ingredients and flavours being fragmented, with most providers concentrating on particular sets of related ingredients and flavours. The particular properties of a product can be tailored to give a customer's product individual characteristics, which provides an important means of customer retention and impose barriers to entry for new competitors. Due to their specialised nature, once included in a customer's end-product, ingredients and flavours are not easily replaceable with alternative or substitute products. As a result of these factors, the breadth of the Group's product offering and its ability to combine individual ingredients and flavours into customised solutions for its customers is a key factor that differentiates it from its competitors.
The Taste and Nutrition business supplies its products to a wide range of international food and beverage companies, with no one customer accounting for more than 4% of the business's revenue in 2018 and the top 10 Group customers accounting for less than 25% of the Group's revenue in 2018. Examples of the Group's taste and nutrition customers include AB InBev, Campbell's, Coca Cola, General Mills, Grupo Bimbo, Kellogg’s, Kraft Heinz, Lilly, McDonald's, Mondelez, Nestlé, PepsiCo, Pfizer, Tyson, Starbucks and Unilever.
Because the end-use of ingredients and flavours is in consumer products, the ingredients and flavours market is ultimately driven by consumer demand and preferences in the food and beverage markets. Currently, these markets are seeing an unprecedented level of change in consumer behaviours. Some key catalysts driving these changes are; i) changing demographics (for example, growth in millennials, growth in single households and ethnic expansion) ii) changing attitudes (for example, social and ethical responsibility, "life is an experience" and instant gratification)) iii) pace of life (for example, less personal time and need for convenience) and iv) awareness (for example, trying to follow a proactive healthy life style, eat real food and clean label). These have led to a variety of new shopping behaviours where for example consumers are purchasing less from the "centre of the store" (frozen and dried ingredient categories) and more from the periphery of the store (fresh and natural). These preferences, coupled with the growth of e-tailing, convenience stores and discounters, are making for a rapidly changing consumer environment. One thing that is not changing however is the requirement for products to taste good. The Group believes it is well positioned to respond to changing consumer trends and assist its customers to be innovation leaders and to bring new products to market quickly.
The internationalisation of food markets in response to globalisation and increasing consumer wealth in developing markets has also resulted in the global expansion of food and beverage manufacturers and foodservice companies that seek to provide consistently high quality prepared food products on a global basis. Responding to the tastes and preferences of a new set of consumers in developing markets has led to a proliferation of new product developments and innovation, providing significant growth opportunities for competent ingredient suppliers capable of delivering the requisite technologies and range of ingredient systems to service the global marketplace.
Consumer Foods
Consumer Foods, is a manufacturing and marketer of added-value branded and customer branded chilled foods principally to the UK and Irish consumer foods markets. Its product portfolio comprises meat products, ready meals, ready-to-cook products, savoury snacks, cheese, cheese snacks, dairy snacks, dairy spreads, low-fat spreads, home-baking products and meat snacks.
The Consumer Foods business supplies its products to major supermarket chains, convenience stores discount chains and independent retailers across the UK and Ireland, and has established strong strategic and commercial alliances with many of its customers.
The Consumer Foods operating business is organised by technology into three sub-businesses: (i) Everyday Fresh, (ii) Convenience Meal Solutions and (iii) Food to go:
• (i) Everyday Fresh (Meat and Dairy) Represented 43% of the Consumer Foods business's revenue in 2018. Manufactures branded and customer branded meats and savoury products, such as sausages, sliced bacon, sliced meats and meat
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snacks, as well as dairy spreads and cheeses. Its brands include Richmond, Wall's, Denny, Dairygold, and Charleville Cheese.
• (ii) Convenience Meal Solutions Represented 43% of the Consumer Foods business's revenue in 2018. Manufactures customer branded chilled and frozen ready meals.
• (iii) Food to Go Represented 14% of the Consumer Foods business's revenue in 2018. Manufactures branded dairy and meat snacks, its brands include Cheestrings, Fridge Raiders and Rollover.
The structure of these sub-businesses enables the Group to respond creatively to the needs and requirements of a wide range of consumers by matching consumer demands, which are constantly changing as a result of evolving lifestyle and leisure requirements, and demographic factors.
In 2018, the Consumer Foods business recorded revenue of €1,339.0 million and a trading profit of €100.1 million (2017: €1,331.0 million and €107.8 million, respectively).
Products
The Consumer Foods business's branded and customer branded foods include sausages, sliced bacon, sliced meats, ready meals, ready-to-cook products, savoury snacks, cheese, cheese snacks, dairy snacks, dairy spreads, low-fat spreads, home-baking products and meat snacks.
Markets and Customers
The Consumer Foods business operates in the UK and Ireland food and non-alcoholic beverage market, which had estimated revenue of €118.5 billion in 2018 (source: Nielsen Scantrak, Kantar Worldpanel and Group management estimates), and specifically in the chilled foods sub-market, which had estimated revenue of €34.0 billion in 2018 (source: Nielsen, IRI and Group management estimates). The Consumer Foods business's key competitors include Bakkavör Group, Greencore Group and Tulip Ltd.
The Consumer Foods market in the UK and Ireland is fragmented, with a large number of providers supplying a variety of different foods. The Consumer Foods business works closely with each of the major, independent and forecourt retailers. Examples of the Group's Consumer Food customers include Aldi, Asda, Dunnes, Morrisons, Sainsbury's, SuperValu, Tesco, The Co-operative and Waitrose.
The chilled foods market in the UK and Ireland is driven by consumer demand, which is heavily affected by the overall macroeconomic environment. Demand for chilled foods in the UK and Ireland has been impacted by consumer sentiment and dynamics as a result of, among other things, the uncertainty arising from the result of the UK electorate voting to leave the EU. This has resulted in a decline in consumer spending and a change in consumer shopping behaviour. Both discounters and premium end retailers have continued to steadily gain market share, while the mainstream grocers have become squeezed in the middle and lost out on market share to these channels. The Group is very well positioned to capitalise on these changes, as strong relationships have been built up with all retailers across these channels. Nevertheless, the entire chilled foods market continues to be affected by pricing pressure from food retailers.
Facilities
The Group has manufacturing facilities at 147 sites across 32 countries and sales offices in an additional 12 countries. Of its manufacturing sites, 132 manufacture products for the Taste & Nutrition business and 15 manufacture products for the Consumer Foods business.
The Group's manufacturing facilities provide it with a broad processing capability, including spray drying, extrusion, baking, fermentation, evaporation and centrifugation, ultrafiltration, cold form extrusion, direct expansion extrusion, forming and moulding, encapsulation/compounding, extraction and pyrolysis.
The Group has manufacturing facilities in the following countries: Australia, Belarus, Brazil, Canada, China, Costa Rica, Denmark, El Salvador, France, Germany, Guatemala, India, Indonesia, Ireland, Italy, Malaysia, Mexico, Netherlands, New Zealand, Oman, Panama, Philippines, Poland, Russia, Saudi Arabia, South Africa, South Korea, Spain, Thailand, Turkey, the UK and the United States.
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Given the number and geographical spread of the Group's manufacturing facilities, it is not reliant on any one manufacturing facility.
The Group engages in ongoing business efficiency programmes to improve the efficiency of its manufacturing processes and operates a lean manufacturing programme, which is designed to ensure that its products are manufactured with as little waste as possible. See "Towards 2020 Sustainability Programme".
The Group's manufacturing and sales facilities are supported by a network of technology and innovation centres and regional development and application centres. See "Research and Development."
Procurement and Raw Materials
The Group has a centralised procurement function that delegates authority to both regional buyers and, in the case of key raw materials, category buyers. The function works closely with supply chain and quality assurance teams to ensure the quality, sustainability, repeatability and predictability of the Group's raw materials. The Group continuously monitors worldwide supply and cost trends for its raw materials, so that it can act quickly to obtain the ingredients and packaging needed for its products.
Most of the Group's raw materials are derived from natural sources, such as plant or animal products, and are provided to the Group by third-party suppliers. The Group also uses significant quantities of plastic, cardboard and paper to package its products, and natural gas, oil, coal and electricity for its manufacturing facilities and warehouses. The Taste & Nutrition business's principal raw materials include flavours, proteins, functional ingredients such as emulsifiers, enzymes, cultures, hydrocolloids and colours, and raw materials such as dairy, meat, flour, fruits, oils, soya, spices, starch and sugar. The Consumer Foods business's principal raw materials include meat and dairy products, oils and fats, as well as some ingredients and flavours supplied by the Taste & Nutrition business.
The Group sources raw materials from approximately 15,000 suppliers. Because of the nature of many of its raw materials, the Group is not dependent on any one supplier. The prices for raw materials used in the Group's products are affected by external factors, such as weather conditions, market conditions, currency fluctuations and the effects of governmental regulation. While the prices of the Group's principal raw materials can be expected to fluctuate, the Group believes there will continue to be an adequate supply of the raw materials it uses and that they will generally remain available from numerous sources. Together with its customers, the Group has actively managed the volatile raw material prices that have been experienced in recent years and has been largely successful in mitigating increased raw material prices through pricing actions, such as passing through changes in raw material costs to its customers, and business efficiency programmes.
Raw material hedging may be put in place at the time pricing commitments are agreed with customers to hedge out the raw material exposure. It is the Group's policy to manage raw material price risk through "back-to-back" arrangements with customers, through forward purchasing and the targeted use of raw material hedges.
Distribution, Sales and Marketing
Taste & Nutrition
The Taste & Nutrition operating business distributes its products directly to its customers through third party transportation providers. The Group employs salaried sales staff, who are generally responsible for sales to particular customers or groups of customers, as close customer relationships are essential to the Group's Taste & Nutrition business.
The operating business's marketing efforts are targeted at its business customers, rather than consumers, and include traditional print media and trade fairs, as well as customer visits to the Group's technology and innovation centres, which provide the opportunity to demonstrate new products and solutions to customers. For example, the Group's consolidation of its many research and development facilities in the United States and Europe into two world class facilities in Beloit (Wisconsin) and in Naas (near Dublin) has enabled it to provide its customers with demonstrations of its entire range of technologies in one visit, whereas previously a customer had to visit several facilities in several different cities to experience the full range of the Group's capabilities. Co-location also enhances the Group's ability to provide complete product solutions to customers across a range of ingredients at a much faster speed to market.
The Group provides integrated, customer-focused product development through its technology and innovation centres, which align it very closely with its customers. Customer relationship management is tailored to suit the
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needs of individual customers and the Group uses a global customer relationship management system to assist it with all aspects of customer relationship management.
Consumer Foods
The Consumer Foods business distributes its products through distribution centres, satellite warehouses, company-operated and third-party cold-storage facilities, depots and other facilities. Additionally, the business's marketing efforts are conducted through three principal sets of activities: (i) consumer marketing; (ii) consumer incentives; and (iii) trade promotions.
Intellectual Property
The Group pursues an active brand strategy and has numerous trademarks. The Group protects its trademarks by registration in the markets in which it sells its products. Trademark protection continues for as long as the trademark is used and registered. Registrations generally are for renewable, fixed terms. While the Group's trademark portfolio is important to its business, the loss of one trademark or a group of related trademarks would not have a material adverse effect on its business.
The Group also owns a number of patents worldwide. However, many of the Group's proprietary ingredients and flavour formulations are not patented, and the Group often relies on trade secrets to protect its proprietary formulations, as this does not require it to publicly file information regarding its intellectual property. To help maintain the confidentiality of its trade secrets, the Group enters into confidentiality and non-disclosure agreements with its employees, suppliers and customers. In addition, the Group believes that its solutions model and its technology layering makes its products difficult to replicate or displace. The Group considers its portfolio of patents, patent applications, proprietary trade secrets, technology, know-how processes and related intellectual property rights to be of material importance to its operations. While the Group's patent portfolio is important to its business, the loss of one patent or a group of related patents would not have a material adverse effect on its business. The Group has either been issued patents or has patent applications pending for a number of current and potential products. Patents issued, or applied for, cover inventions ranging from specific ingredients and flavours to processes relating to their production. The Group's issued patents extend for varying periods according to the date of patent application filing or grant and the legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage as determined by the patent office or courts in the country, and the availability of legal remedies in the country.
See "Risk Factors—Risks Related to the Group's Business—The Group may not be able to protect its intellectual property rights or to successfully defend itself against allegations that it has infringed a third- party's intellectual property rights."
Research and Development
The Group is fully committed to ongoing technological innovation in all sectors of its business. To facilitate this, the Group has consolidated its research and development activities into a highly-focused network of technology and innovation centres as part of its 1 Kerry Programme. The Group intends to continue to lead in its chosen sectors and proactively meet customer and market needs by using these global resources and sharing industry, academic and Group-wide scientific developments and knowledge. The Group recognises the need to evaluate market trends, stay at the forefront of technological development and deliver commercially successful solutions in the dynamic and competitive food and beverage marketplace.
The Group has consolidated its research and development activities in a number of regions. The Group currently has a Global Technology and Innovation Centre based in Naas, Ireland and a Technology and Innovation Centre in Beloit, Wisconsin, USA. These centres provide customers with the opportunity to engage with the Group’s taste and nutrition foundational technologies through dedicated customer application suites, culinary theatres, sensory series and customer application pilot plant production facilities. The Group’s global technology and innovation centres are supported by a number of regional development and application centres in Singapore, Shaghai, China, Bangalore, India, Campinas, Brazil and in San Juan Del Rio, Mexico.
These technology and innovation centres are supported by a number of local development and application centres in various countries around the world. The Group currently employs over 900 scientists and food science specialists, and spent €274.6 million on research and development in 2018 (2017: €268.7 million). This equated to 4.2% of Group revenue in 2018 (2017: 4.2%). The Group's specialists work in partnership with the Group's customers to provide technology-based solutions that meet their unique product development needs. The
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Group's food scientists also collaborate with external scientific and nutrition experts to assist in product innovation.
The Group intends that its existing and future technology and innovation centres to be at the heart of the Group's innovation strategy with respect to its taste and nutrition business. These centres focus on ensuring that integrated solutions, as well as individual ingredients and flavours, can be reproduced efficiently and to customers' specifications, while ensuring that all of the Group's products meet consumers' changing health and nutritional preferences. For example, the Group's research and development activities have enabled it to achieve significant reductions in calories, sodium, saturated fats and trans-fat in many of its products and its customers' products.
Employees
In 2018, the Group's average number of (full-time equivalent) employees worldwide was 25,255 (2017: 23,969. The Group is subject to various laws and regulations relating to its relationships with its employees, including with respect to equality and anti-discrimination, and many of its employees are members of labour unions.
The Group's success is built around the commitment, skills and creativity of its employees, and the Group provides structured training and development programmes for employees to enhance the skills, knowledge and capability necessary for further growth within the organisation. The Group has adopted a Code of Conduct and related policies with which employees at all levels of the Group must comply.
The Group believes it has good relationships with employees and their representative organisations and that it benefits from the extensive experience of its management team.
Regulation
The Group is subject to a variety of local, national and supranational regulation in the jurisdictions in which it operates, including with respect to the production, marketing, sale and labelling of food and food ingredients. The Group is also subject to various supranational, national and local environmental laws and regulations in the jurisdictions in which it operates, including with respect to emissions control, and the production, processing and handling of hazardous waste. In order to help ensure that the Group remains in compliance with applicable regulatory requirements and prevent any contamination of its products, the Group maintains a strong focus on quality control and supply quality. In addition, the Group monitors and maintains compliance with all forthcoming regulatory developments. Set out below are certain regional examples of regulations relevant to the Group:
• the Group's operations in the European Union are subject to Regulation No. 178/2002/EC, which sets out the general principles of European Union food ingredient law and requires, among other things, that food and food ingredients be traceable to their source. The Regulation also established the European Food Safety Authority, which works in close collaboration with national food safety authorities in the European Union to provide independent scientific advice and risk assessments in the areas of food and feed safety, nutrition, animal health and welfare, plant protection and plant health. Detailed rules also exist for the authorisation of novel foods and novel food ingredients (within the meaning of Regulation No. 258/97/EC concerning novel foods and novel food ingredients), as well as food ingredients based on genetically modified organisms. There are also a number of European Union regulations relating to food improvement agents, including provisions and authorisation procedures relating to food additives (such as Regulation No. 1333/2008), food enzymes and flavourings, as well as food ingredients with flavouring properties (such as Regulation No. 1334/2008/EC). Specific limits exist for the use of certain chemicals in foodstuffs, foods and food ingredients, while separate legislation regulates the additives that may be used in the manufacture of plastic materials and articles intended to come into contact with foodstuffs. In addition, Regulation No. 1169/2011 lays out the obligations for provision of information to consumers in terms of labelling, presentation and advertising as well as nutrition information. The Group's pharmaceutical excipients are also subject to regulation in the European Union; and
• the Group's operations in the United States are subject to the Federal Food, Drug and Cosmetic Act (the "FFDCA"), which is the primary United States law that regulates food and anything pertaining to food safety, including additives and packaging. The U.S. Food and Drug Administration is the lead agency for the FFDCA, and enacts and enforces regulations relating to the manufacturing, distribution and labelling of food products, biologics, animal feed, and drug & drug products, including the Group’s
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pharmaceutical excipients. The United States Department of Agriculture is the lead agency for the regulations and enforcement relating to meat and meat products from animals and for the bioengineering standard for all food stuffs. In addition, various state agencies regulate the Group's U.S. operations by licensing plants, enforcing federal and state standards for selected food products, grading food products, certifying facilities for various claims (for example, non-GMO or organic), inspecting plants and warehouses, regulating trade practices related to the sale of food products and imposing their own labelling requirements on food products.
In the other jurisdictions in which the Group operates, it faces a variety of local and national laws and regulations, some of which are similar to those applicable to its European Union and U.S. operations. Although these regulations vary from jurisdiction to jurisdiction, the regulatory environment in most jurisdictions outside the European Union and the United States generally involves more uncertainty regarding laws and regulations and less consistent enforcement. For more information regarding these risks and uncertainties, see "Risk Factors—Risks Related to the Group's Business—Non-compliance with and/or violations of applicable laws or regulations could lead to legal or regulatory sanctions, significant costs and reputational damage for the Group."
Insurance
The Group maintains comprehensive insurance policies with respect to casualty, property and certain specialised coverage. The Guarantor's insurance programme is mainly divided into two general categories:
• Assets: these insurance policies cover the Guarantor's physical properties and include global property and business interruption; and
• Liabilities: these insurance policies cover losses due to damages caused to third parties and include general and product liability, directors and officer's liability, environmental liability, cybercrime, employer liability/workman's compensation and motor insurance (which is taken out in accordance with local requirements).
The Guarantor believes it has adequate Group-wide insurance cover, including self-insurance, taking into account its market capitalisation and its worldwide presence. The Guarantor further believes that the level of insurance, including self-insurance, it maintains is appropriate for the risks of its business and is comparable to that maintained by other companies in its industry.
For more details on insurance risk see the Risk Factor entitled "The Group's insurance coverage does not cover all of the potential losses, liability and damage related to the business in which the Group operates"
Ratings
The Guarantor has been assigned a long term debt credit rating of Baa2 by Moody's Investors Service, Inc. ("Moody's") and BBB+ by S&P Global Ratings Europe Limited ("S&P").
Moody's is not established in the EU but its ratings are endorsed by Moody's Investors Service Limited which is established in the EU and registered under the CRA Regulation.
A rating is not a recommendation to buy, sell or hold securities and may be subject to change, suspension or withdrawal at any time by the assigning rating agency.
For more detail on credit ratings risks see the Risk Factor entitled "Risks related to the market generally – Credit ratings may not reflect all risks" and the Risk Factor entitled, "Risks related to the Group's business – The Group may not have access to the funds required for future growth and expansion or refinancing needs".
Material Contracts
Other than the financing arrangements described under "Description of Existing Financing Arrangements," the Group is not party to any material contracts other than those entered into in the ordinary course of business.
Legal Proceedings
From time to time, the Group may be involved in, or threatened with, legal or other proceedings in the ordinary course of its business, particularly in the areas of product liability and breach of warranty. The Group is not
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aware of any legal or other proceedings that would individually or in the aggregate be expected to have a material adverse effect on its results of operations or financial condition (see further The Group's operations are subject to environmental regulations, which could expose it to significant compliance costs and litigation relating to environmental matters and reputational damage for the Group and the Group is exposed to litigation).
Description of Existing Financing Arrangements
The following summary of the Group's principal existing financing arrangements does not purport to be complete and is qualified in its entirety by reference to the definitive documents for such indebtedness. Such documents do not form part of this Offering Circular.
The Group is not aware of any stated events of default as defined in these financing agreements. It should be noted that the financial terms used in the Group's financing agreements have been defined by the contracting parties. As a result, the financial terms used in the Group's financing agreements and their descriptions do not have the same meaning as those defined under IFRS and used elsewhere in this Offering Circular.
Facility Agreement
On 14 June 2019, the Issuer and the Guarantor entered into a five-year green revolving credit facility agreement with a syndicate of 14 financial institutions including Allied Irish Banks plc, Bank of America Merrill Lynch International Limited, Barclays Bank Ireland plc, BNP Paribas Dublin Branch, Citibank Europe PLC, Coöperatieve Centrale Raifeisen-Boerenleenbank B.A. (Trading as Rabobank) Dublin Branch, Danske Bank A/S Irish Branch, Deutsche Bank Luxembourg S.A, Goldman Sachs Bank USA, HSBC Bank plc, JP Morgan Chase Bank N.A. London Branch, Mizuho Bank Ltd, The Governor and Company of the Bank or Ireland and Ulster Bank Ireland Limited (the "Facility Agreement"). The Facility Agreement provides a multicurrency revolving credit facility in an aggregate principal amount of €1,100,000,000, which may be used for general corporate purposes. The revolving credit facility matures on 14 June 2024 and the Issuer has the option to extend the credit period for an additional year on the first and second anniversary of the loan date.
A key feature of this new facility is that an element of the interest that the Issuer will pay under the facility is linked to and contingent upon the Group meeting certain sustainability targets. The inclusion of Environmental, Social and Governance (ESG) criteria into our debt financing is a further example of how sustainability is being integrated into all areas of the organisation and the adoption of this innovative financing model provides even further incentive for our ongoing efforts to establish a more sustainable business.
Amounts drawn under the Facility Agreement are charged interest at a floating rate that is based on the European Interbank Offered Rate (EURIBOR), if in euro, or the London Interbank Offered Rate (LIBOR), if in any other currency, plus a margin. The margin shall also be adjusted +/- based on the Group’s achievement of sustainability targets as agreed with the 14 financial institutions.
The Facility Agreement is guaranteed by the Guarantor. The Group may use the proceeds of this offering to repay drawdowns under the Facility Agreement. See "Use of Proceeds".
If the Guarantor defaults under the terms of the Facility Agreement, the lenders may terminate any loans outstanding under the facility. In addition, the lenders may terminate the facility if any person or group of persons acting in concert (other than KCC) directly or indirectly acquires 29.9 per cent. or more of the Guarantor's issued share capital or the power to (i) cast, or control the casting of, 29.9 per cent. or more of the maximum number of votes that might be cast at a general meeting of the Guarantor; or , (ii) appoint or remove all or a majority of the Guarantor's directors or other equivalent officers of the Guarantor (iii) give directions with respect to the operating and financial policies of the Guarantor which the directors must comply.
The entry into this Facility Agreement has adjusted the weighted average maturity profile of the Guarantor's consolidated net debt from 4.8 years at 31 December 2018 to 4.6 years at 30 June 2019.
Note Purchase Agreement
Pursuant to a note purchase agreement dated 20 January 2010, the Issuer has issued an aggregate principal amount of $600,000,000 of its Senior Notes, Series 2010 (the "2010 Notes"), divided into four tranches: (i) tranche A, which bears interest at a rate of 4.37 per cent. per annum on an aggregate principal amount of $192,000,000, matured on 20 January 2017, (ii) tranche B, which bears interest at a rate of 4.83 per cent. per annum on an aggregate principal amount of $208,000,000, matures on 20 January 2020, (iii) tranche C, which
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bears interest at a rate of 4.93 per cent. per annum on an aggregate principal amount of $125,000,000, matures on 20 January 2022, and (iv) tranche D, which bears interest at a rate of 5.08 per cent. per annum on an aggregate principal amount of $75,000,000, matures on 20 January 2025.
The 2010 Notes are guaranteed by the Guarantor. The note purchase agreement contains financial covenants requiring:
(i) the Guarantor's group consolidated interest cover (the ratio of the Group's consolidated adjusted EBITDA to the Group's consolidated net interest charges) not to be less than 4.00:1.0 in respect of any relevant period (as at 31 December 2018, the relevant ratio was 14.7:1.0); and
(ii) the Guarantor's group leverage (the ratio of the Group's consolidated net financial indebtedness to the Group's consolidated adjusted EBITDA) not to be more than 3.50:1.0 in respect of any relevant period (as at 31 December 2018, the relevant ratio was 1.7:1.0).
The note purchase agreements also contain a cross-default clause and customary covenants that impose certain restrictions on the Group's business activities. These restrictions include limitations on granting certain kinds of security interests, entering into certain mergers, disposing of certain assets, changing the Group's business and incurring certain kinds of indebtedness. The note purchase agreements allow the Issuer to redeem the notes under certain circumstances. In addition, the Issuer must offer to redeem the notes if any person or group of persons (other than KCC) acquires, directly or indirectly, beneficial ownership of more than 50 per cent. of the total voting power of the outstanding stock of the Guarantor.
Rule 144A Note Issuance
Pursuant to a purchase agreement dated 2 April 2013 between Merrill Lynch, Pierce, Fenner & Smith Inc., BNP Paribas Securities Corp, Citigroup Global Markets Inc. and RBS Securities Inc. (the "Initial Purchasers") and Kerry Group Financial Services (the "Issuer"), the Issuer issued $750 million aggregate principal 3.2% Notes due 2023 to the Initial Purchasers (the "2013 Notes").
The 2013 Notes were issued pursuant to an indenture dated 9 April 2013 between the Issuer, the Guarantor and Deutsche Bank Trust Company America as trustee.
The Initial Purchasers re-sold the Rule 144A notes to certain institutions in the US in reliance upon Rule 144A under the Securities Act and re-sold Regulation S notes outside the US in offshore transactions in reliance on Regulation S.
Payments of amounts due under the 2013 Notes are fully and unconditionally guaranteed by the Guarantor on a senior unsecured basis.
The 2013 Notes are subject to a change of control trigger event which occurs if there is a change of control of the Guarantor and the 2013 Notes cease to be rated investment grade by S&P and Moody's. The 2013 Notes also contain certain covenants including limitations on liens, limitation on sale and leaseback transactions and limitations on mergers and consolidations.
2015 Note Issuance
Pursuant to a subscription agreement dated 8 September 2015 between Barclays Bank Plc, Deutsche Bank AG, London Branch, J.P. Morgan Securities Plc, Danske Bank A/S and Mizuho International plc (the "Joint Lead Managers") and Kerry Group Financial Services (the "Issuer"), and Kerry Group Plc (the “Guarantor”) the Issuer issued €750 million aggregate principal 2.375% Notes due 2025 (the "2015 Notes").
The 2015 Notes were issued pursuant to a Trust Deed dated 10 September 2015 between the Issuer, the Guarantor and Deutsche Trust Company Limited as trustee.
Payments of amounts due under the 2015 Notes are fully and unconditionally guaranteed by the Guarantor on a senior unsecured basis.
The 2015 Notes are subject to a change of control trigger event which occurs if there is a change of control of the Guarantor and the 2015 Notes cease to be rated investment grade by S&P and Moody's.
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Bilateral Credit Agreements
The Group also has certain uncommitted bilateral loan facilities. As of 31 December 2018, the Group's portfolio of undrawn standby facilities amounted to €320.0 million (2017: €323.0 million).
Recent Developments
On 8 August 2019, the Guarantor published a news release of its interim management report for the half year ended 30 June 2019 containing its condensed consolidated interim financial statements as at and in respect of the half year ended 30 June 2019 (set out on pages 12 to 26 of the interim management report and which shall be deemed to be incorporated in, and to form part of, this Offering Circular).
During the six month period ending 30 June 2019, the Group completed 3 acquisitions at a total cost of €327.2 million.
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MANAGEMENT OF THE GROUP
Board of Directors
The board of directors of the Guarantor (the "Board") leads and maintains effective control over the Group's activities. The Board is responsible for ensuring the long-term sustainable success of the Group through experienced leadership and establishing effective control and oversight of the Group’s activities. The Directors are responsible for strategic oversight of the Group and may exercise all the powers of the Guarantor subject to the provisions of relevant statutes, to any directions given by shareholders in General Meeting and to the Guarantor's Circular and Articles of Association. The fundamental responsibility of the Directors is to exercise its business judgment on matters of critical and long-term significance for the Group.
The Board has a formal schedule of matters that are specifically reserved to it for decision, which includes (i) appointments to the Board; (ii) ensuring compliance with corporate governance, legal, statutory and regulatory requirements; (iii) approval of the overall Group strategic and operating plans; (iv) monitoring and review of risk management and internal control systems; (v) approval of acquisitions and divestitures; (vi) approval of significant capital expenditure; (vii) treasury policy including approval of changes to the Group’s capital structure; (viii) approval of dividend policy and dividends; (ix) approval of annual budgets; (x) approval of preliminary results, interim management statements and interim financial statements; (xi) assessment of the long term viability of the Group as a going concern; and (xii) preparation of, and confirmation that, the annual report and financial statements present a fair, balanced and understandable assessment of the Guarantor's position, performance and prospects.
The Board currently consists of twelve members – three executive directors and nine independent non- executive directors.
Board Committees
The Board has delegated authority to three committees of the Board on a number of specific matters as detailed below.
Audit Committee
The Audit Committee consists of not less than three members, each of whom must be an independent non- executive director and at least one of whom must have recent and relevant financial expertise. As at the date of this Offering Circular, the following directors are members of the Audit Committee: Dr. Hugh Brady, Ms. Joan Garahy, Mr. Tom Moran and Mr. Christopher Rogers (Chairman).
The Audit Committee must meet no less than four times a year and regularly invites the Chief Executive Officer, the Chief Financial Officer, the Group Financial Controller and the Head of Internal Audit as well as representatives of the external auditors to attend meetings of the Committee. When required, other key executives and senior management are invited to attend meetings to provide a deeper insight on agenda items relating to the Group’s principal risks.
The Company Secretary is the Secretary of the Audit Committee.
The main role and responsibilities of the Audit Committee include: (i) ensuring the interests of shareholders are properly protected in relation to financial reporting and internal control; (ii) assisting the Board in executing its duties in relation to risk management and oversight and monitoring of internal controls; (iii) monitoring the work of the Internal Audit function; (iv) making recommendations to the Board in relation to the appointment, reappointment and removal of the Group’s external auditor as a well as monitoring their effectiveness and independence; (v) reviewing the Interim Management Statements, the Interim and Annual Consolidated Financial Statements and considering the appropriateness of accounting policies and practices; (vi) advising the Board on whether it believes there are any material uncertainties that may impact the Group’s ability to continue as a going concern or impact the Group’s long term viability; (vii) advising the Board on whether the Annual Report and Financial Statements, taken as a whole are fair, balanced and understandable; (viii) advising the Board on the effectiveness of the Group’s whistleblowing arrangements; and (ix) advising the Board in relation to compliance with stock exchange and other legal or regulatory requirements.
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Nomination Committee
The Nomination Committee consists of not less than three members, the majority of whom must be independent non-executive directors. As at the date of this Offering Circular, the following directors are members of the Nomination Committee: Dr. Hugh Brady, Dr. Karin Dorrepaal, Mr. James C. Kenny and Mr. Philip Toomey (Chairman).
The Nomination Committee must meet no less than four times a year. The Company Secretary is the Secretary of the Nomination Committee.
The main role and responsibilities of the Nomination Committee include: (i) evaluating the balance of skills, experience, independence, knowledge and diversity of the Board to ensure optimum size and composition; (ii) ensuring an appropriate nomination process is in place for Board appointments; (iii) ensuring a formal induction plan is in place for each new Director on appointment; (iv) reviewing a candidate's other commitments to ensure that on appointment, a candidate has sufficient time to undertake the role; (v) reviewing the Board Diversity Policy; (vi) making recommendations to the Board on the appointment and re-appointment of both Executive and Non-executive Directors; (vii) making recommendations to the Board concerning membership of Board Committees in consultation with the Chairs of the Committees; (viii) ensuring plans and processes are in place for succession planning for Directors, including the Chairman, Senior Independent Director, non-executive Directors and senior management positions; and (ix) overseeing the conduct of the annual evaluation of the Board and its Committees.
Remuneration Committee
The Remuneration Committee consists of not less than three members, each of whom must be an independent non-executive director. As at the date of this Offering Circular, the following directors are members of the Remuneration Committee: Mr. James C. Kenny, Dr. Karin Dorrepaal, Mr. Tom Moran and Ms. Joan Garahy (Chairperson).
The Remuneration Committee must meet no less than four times a year. The Company Secretary is the Secretary of the Remuneration Committee.
The main roles and responsibilities of the Remuneration Committee include: (i) to determine the remuneration policy for, and set the remuneration of, the CEO and Executive Directors; (ii) to review the remuneration of the Chairman and non-executive Directors; (iii) to receive recommendations from the CEO and approve the salaries and overall remuneration of Executive Committee members and the Company Secretary; (iv) to review and approve incentive plan structures and targets; (v) to agree the design of all share incentive plans for approval by the shareholders; (vi) to ensure the contractual terms of Executive Directors are deemed fair and reasonable; (vii) to place before shareholders at each AGM, a Directors' Remuneration Report outlining the Guarantor's policy and disclosures on remuneration; (viii) to arrange where appropriate, external benchmarking of overall remuneration levels and the effectiveness of share based incentives and long term incentive schemes; and (ix) to review annually its own performance and terms of reference to ensure it is operating effectively; (x) to engage with the workforce to explain how executive remuneration aligns with the wider company pay policy; (xi) to review workforce remuneration and related policies and the alignment of incentives and rewards with the Group’s culture, and take these into account when setting the policy for executives; and (xii) to exercise discretion when appropriate, in the interest of alignment and fairness.
Directors
The Board consists of three executive directors and nine independent non-executive directors.
The following table sets out certain information with respect to the members of the Board. The age and biography information for each of the Directors set out below is as per the date of the 2018 Annual Report. There have been no changes to the members of the Board in the period since the 2018 Annual Report. The business address of the directors is Kerry Group plc, Prince's Street, Tralee, Co. Kerry, Ireland, V92 EH11.
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Name Age Position Mr. Philip Toomey ...... 65 Non-executive Director – Chairman of the Board Mr. Edmond Scanlon ...... 45 Executive Director – Chief Executive Officer Ms. Marguerite Larkin ...... 47 Executive Director – Chief Financial Officer Mr. Gerry Behan ...... 54 Executive Director – President and CEO Kerry Taste & Nutrition Dr. Hugh Brady ...... 59 Non-executive Director Mr. Gerard Culligan ...... 44 Non-executive Director Dr. Karin Dorrepaal ...... 57 Non-executive Director Ms. Joan Garahy ...... 56 Non-executive Director Mr. James C. Kenny ...... 65 Non-executive Director Mr. Tom Moran ...... 63 Non-executive Director Mr. Con Murphy ...... 54 Non-executive Director Mr. Christopher Rogers...... 58 Non-executive Director
Mr. Ronan Deasy is Company Secretary.
Mr. Philip Toomey—Chairman of the Board
Philip was formerly Global Chief Operating Officer for the financial services industry practice at Accenture and has a wide range of international consulting experience. He was also a member of the Accenture Global Leadership Council.
He is a Fellow of Chartered Accountants Ireland.
Philip was appointed Chairman of the Board on 3 May 2018 and has served as a Director for seven years. He is Chairman of the Nomination Committee having previously served as Senior Independent Director and Chairman of the Audit Committee.
Mr. Edmond Scanlon—Chief Executive Officer
Edmond joined Kerry’s graduate development programme in Ireland in 1996. He was appointed Vice President Finance, Supply Chain and Operations of Kerry’s Global Flavours Division in 2004. In 2007, he was appointed Vice President Mergers & Acquisitions, Kerry Americas Region, before being appointed Global President Kerry Functional Ingredients & Actives in late 2008. In 2012, he was appointed President of Kerry China, prior to his appointment as President & CEO Kerry Asia-Pacific region in November 2013.
Edmond was appointed Executive Director and Group CEO in October 2017.
Ms. Marguerite Larkin—Chief Financial Officer
Marguerite was formerly a senior partner with Deloitte and held a number of leadership roles within Deloitte Ireland including Audit Assurance and Risk Advisory Leader, Head of Consumer Business Industry Practice, Client & Industries Partner and was a member of the Executive Committee. She has over 25 years global experience and has served as lead client partner for a number of multinationals operating in a broad range of industries including food & beverage, pharma and technology. Marguerite is a Fellow of Chartered Accountants Ireland and holds a Bachelor of Commerce degree and Masters in Accounting.
Marguerite was appointed Executive Director and Group Chief Financial Officer on 30 September 2018.
Mr. Gerry Behan— Executive Director – President & CEO Kerry Taste & Nutrition
Gerry joined Kerry's graduate recruitment programme in 1986 and has held a number of senior financial and management roles primarily in the Americas region. He was appointed President and Chief Executive Officer of Kerry's Global Taste & Nutrition business in 2011. Gerry has served as an Executive Director on the Board for 11 years.
Dr. Hugh Brady—Non-executive Director
Hugh is President and Vice Chancellor of the University of Bristol in the UK, a position he has held since 2015. He was previously President of University College Dublin (UCD) from 2004 to 2013.
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Prior to this, Hugh had a successful career as a physician and biomedical research scientist in the US where he served on the faculty of Harvard Medical School for almost a decade prior to returning to his alma mater as Professor of Medicine and Therapeutics in UCD.
Hugh is a Non-Executive Director on the Board of ICON plc.
In addition, Hugh has held many national and international leadership roles including Chairman of the Irish Health Research Board and Chairman of the Universitas 21 Network of global research universities.
Hugh joined both the Audit and Nomination Committees in 2015.
Mr. Gerard Culligan—Non-executive Director
Gerard operates his own business in the agribusiness sector. Gerard is a Director and co-owner of two private companies in the marine industry.
Dr. Karin Dorrepaal—Non-executive Director
Karin was an Executive Director on the Board of Schering AG in Berlin from 2004 until 2006 when it was acquired by Bayer AG. In this role Karin was responsible for the Diagnostic Imaging business as well as worldwide manufacturing and procurement.
Between 1990 and 2004, Karin was a partner at Booz & Co., a consultancy firm where she specialised in the pharmaceutical industry advising clients on issues regarding strategy, sales, marketing and supply chain.
Karin received her Ph.D. from the Free University of Amsterdam, The Netherlands and also holds an MBA from the Erasmus University Rotterdam School of Management.
Currently, Karin is a non-executive Director on the Boards of Gerresheimer AG, Paion AG (vice Chairperson) and Almirall S.A. Karin is also a director of a number of private companies.
Karin joined the Remuneration Committee in January 2015 and Nomination Committee in December 2015.
Ms. Joan Garrahy—Non-executive Director
Joan is Managing Director of ClearView Investments & Pensions Limited. She has 30 years’ experience advising on and managing investment funds. She is a former Managing Director of HBCL Investments & Pensions and Director of investments at HC Financial Services. In the past, Joan worked with the National Treasury Management Agency (Ireland) as head of research at the National Pension Reserve Fund (Ireland) and was also head of research with Hibernian Investment Managers.
Joan is a Non-Executive Director on the Boards of ICON plc and Irish Residential Properties REIT plc as well as being a director of a number of private companies.
In February 2012, Joan was appointed Chairperson of the Remuneration Committee and joined the Audit Committee on the same date. She was appointed Senior Independent Director on 3 May 2018.
Mr. James C. Kenny—Non-executive Director
James was formerly Executive Vice President of US based Kenny Construction Inc. and President of Kenny Management Services Inc. He previously served as US Ambassador to Ireland from July 2003 to June 2006.
James is a Non-Executive Director on the Board of Hub Group, a multimodal transportation company, listed on the NASDAQ.
James joined both the Remuneration and Nomination Committees in February 2012.
Mr. Tom Moran—Non-executive Director
Tom has had a long and distinguished career within the Irish Public Sector and most recently was Secretary General of the Irish Department of Agriculture, Food and the Marine from 2005 to 2014. Tom also held a number of international policy and international trade negotiation leadership roles. Tom formerly served as Ireland's Agriculture Attaché to France and to the OECD.
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Tom is currently a Board member of An Bord Bia, the Irish Food Board, and chairs its Dairy Subsidiary Board. He is Chairman of the Irish Government Public Appointments Service and also sits on a number of Government Committees.
Tom joined the Audit Committee in December 2015 and the Remuneration Committee in February 2016.
Mr. Con Murphy—Non-executive Director
Con operates his own business in the agribusiness sector and is Chairman of the Irish Montbeliarde Cattle Society. Con is a member of the Board of a small private company.
Mr. Christopher Rogers—Non-executive Director
Christopher was formerly an Executive Director of Whitbread plc for 11 years from 2005, serving as Finance Director for 7 years and then as Global Managing Director of Costa Coffee.
His current non-executive positions include Senior Independent Director at Travis Perkins plc and Non- Executive Director at Vivo Energy plc and Walker Greenbank plc (where he was appointed as Interim Executive Chairman in October 2018 until the new Chief Executive was appointed in March 2019). He is Chairman of the Audit and Risk Committee at Vivo Energy plc and a member of the Audit Committee at Travis Perkins plc.
He is a Fellow of Chartered Accountants England and Wales. He is also a visiting Fellow at Durham University (UK).
He was appointed as a non-executive Director and Chairman of the Audit Committee with effect from 8 May 2018.
Remuneration of Directors
The total remuneration for all directors in 2018 amounted to €9,037,000 (2017: €12,978,000). There were no emoluments paid to the executive or non-executive directors other than as set forth below. The following table sets out the remuneration in 2018 and 2017 of each person that was an executive and non-executive director:
Basic (1) (2) (3) Salaries Benefits Pensions STIP LTIP Fees Total 2018 Total 2017 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 Executive Directors Edmond Scanlon 1,050 34 200 948 345 — 2,577 808 Stan McCarthy(6) ...... — — — — — — — 5,285 Brian Mehigan ...... 703 37 210 530 805 — 2,285 2,363 Marguerite Larkin(4) ...... 177 8 34 133 — — 352 — Gerry Behan ...... 760 63 170 540 1,105 — 2,638 3,233 Flor Healy(2) ...... — — — — — — — 455
2,690 142 614 2,151 2,255 — 7,852 12,144
Non-executive Directors(7) Hugh Brady ...... — — — — — 98 98 78 Paddy Casey(8)...... — — — — — — — 14 Gerard Culligan ...... — — — — — 78 78 34 Karin Dorrepaal ...... — — — — — 98 98 78 Michael Dowling(9)...... — — — — — 149 149 230 Joan Garahy ...... — — — — — 123 123 93 James C. Kenny ...... — — — — — 117 117 97 Tom Moran ...... — — — — — 98 98 78 Con Murphy ...... — — — — — 78 78 34 Christopher Rogers(10) ...... — — — — — 69 69 — Philip Toomey...... — — — — — 277 277 98
1,185 1,185 834
Basic Salary Benefits Pensions STIP LTIP Fees Total 2018 Total 2017 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Executive Directors Stan McCarthy(5) ...... — — — — — — — 5,972 Gerry Behan(5) ...... 901 74 201 640 1,310 — 3,126 3,653
901 74 201 640 1,310 — 3,126 9,625
(1) The pension figure for Edmond Scanlon relates to Irish defined contribution pension benefits. Brian Mehigan, Marguerite Larkin and Flor Healy received a taxable cash payment in lieu of pension benefits and the figures included above reflect this including life cover. The pension figures for Stan McCarthy and Gerry Behan include both defined benefit and defined contribution retirement
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benefits. (2) This STIP amount represents 75% delivered in cash with 25% delivered by way of shares/share options which are deferred for two years. (3) The share price used to calculate the value of the LTIP is the average share price for the three months up to the end of the year being reported. (4) Marguerite Larkin was appointed as CFO and to the Board on 30 September 2018. Her remuneration reflected in the table above relates to remuneration for the period 30 September to 31 December 2018.
(5) The table shows the Executive Directors’ pay in the currency of payment to ensure clarity in reflecting the year on year payment comparisons.
(6) Stan McCarthy and Flor Healy retired as Directors in 2017.
(7) Non-executive Directors’ remuneration consists of fees only. Non-executive Directors are reimbursed for travel and accommodation expenses and any personal tax that may be due on those expenses. The gross amount of these expenses that were deemed to be taxable is €19,814.
(8) Paddy Casey retired as a director on 30 April 2017. (9) Michael Dowling retired as a director on 3 May 2018. (10) Christopher Roger was appointed to the Board on 8 May 2018
Directors' and Company Secretary's Interests in Long Term Incentive Plan
The Group operates one Long Term Incentive Plan ("LTIP") of which the terms and conditions of the LTIP plan were approved by shareholders at the 2013 AGM. The Remuneration Committee approves the terms, conditions and allocation of conditional awards under the Group's LTIP to Executive Directors and senior management. Under this plan, Executive Directors and senior management are invited to participate in conditional awards over shares or share options in the Guarantor.
LTIP
Subject to performance metrics being met, the LTIP award will vest over a three year performance period. 50% of the award is delivered at the vesting date with the remaining 50% of the award being delivered following a two year deferral period. This provides for a combined performance period and deferral period of 5 years.
The first conditional awards under this scheme were made to Executive Directors in 2013. Awards made under this plan potentially vest or partially vest three years after the award date if the predetermined performance targets are achieved. The maximum award that can be made to an individual Executive Director under the LTIP over a 12-month period is equivalent to 180%-200% of basic salary for that period.
An award may lapse if a participant ceases to be employed within the Group before the vesting date. The market price of the shares on the date of each award outlined above is disclosed in note 28 to the Group’s audited consolidated financial statements as at and for the year ended 31 December 2018.
The proportion of each conditional award which vests will depend on the adjusted EPS growth, TSR and ROACE performance of the Group during the relevant three year performance period.
The following table sets out the Executive Directors' and the Company Secretary's interests under the Group's LTIP:
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Share Share Option Share Conditional Conditional Awards Awards Awards Awards Conditional Awards at Vested Vested Lapsed Made Awards at LTIP 1 January During the During the During the During the 31 December Scheme 2018 Year Year Year Year 2018
Directors Edmond Scanlon ...... 2013 40,295 — (4,256) (2,575) 25,625 59,089 Brian Mehigan ...... 2013 44,991 — (9,024) (5,460) 15,474 45,981 Marguerite Larkin(1) ...... 2013 — — — — 7,031 7,031 Gerry Behan ...... 2013 65,105 (14,864) — (8,995) 17,909 59,155 Company Secretary
Ronan Deasy(2)...... 2013 13,417 — (2,159) (1,307) 3,295 13,246 (1) Marguerite Larkin’s LTIP conditional awards during the year were pro-rated based on her time of service. (2) The Company Secretary Ronan Deasy was appointed to the position on 1 March 2018 and his opening LTIP conditional awards are reflected as at that date.
The following table sets out the share options which are held by the executive directors and the Company Secretary under the STIP and LTIP:
Share Share Share Share Options Options Options Options Outstanding Outstanding Exercised Vested at Exercise at 1 January During the During 31 December Price per (3) 2018 Year the Year 2018 Share Directors Edmond Scanlon ...... 4,167 0 5,370 9,537 €0.125 Brian Mehigan...... 65,451 (13,573) 10,971 62,849 €0.125 Marguerite Larkin(1) ...... - - - - - Company Secretary Ronan Deasy(2) ...... 1,231 0 2,159 3,390 €0.125
(1) Marguerite Larkin was appointed to the Board on 30 September 2018 and her opening share option balance is reflected as at that date. (2) Ronan Deasy was appointed as Company Secretary on 1 March 2018 and his opening share option balance is reflected as at that date. (3) Share Options which vested in March 2018 related to 2015 LTIP awards and 25% of the 2017 STIP (paid in March 2018). 50% of share options vested under the LTIP are subject to a two year deferral period and 25% of the STIP payments which are delivered in share options are subject to a two year deferral period.
Once vested, share options under the LTIP can be exercised for up to seven years before they lapse. For share options subject to the two year deferral period, they can be exercised for up to five years following the end of the two year deferral period, before they lapse i.e. seven years following the vest date.
Payments to Former Directors
2018 2017 €’000 €’000 Former Director Stan McCarthy ...... 1,259 - Flor Healy ...... - 298 Total 1,259 298
Stan McCarthy, who retired from the Board on 31 December 2017, was paid 12 months base salary for abiding with the contractual non-compete/non-solicitation requirements of his employment agreement. This amounted to €1,259,000 ($1,486,000) during 2018. In addition, his vested 2013 LTIP awards and vested 2015 STIP awards, which were subject to deferral and disclosed in previous annual reports, were released to him at the normal applicable release dates following the two year deferral period.
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Flor Healy, who retired from the Board on 8 August 2017, was paid €298,000 remuneration in the period 9 August to 31 December 2017. During 2018 he had vested 2013 LTIP awards and vested 2015 STIP awards, which were subject to deferral and disclosed in previous annual reports, released to him at the normal applicable release dates following the two year deferral period.
Payments for Loss of Office
There were no payments for loss of office in 2018 (2017: €nil).
Directors' and Company Secretary's Interests
There have been no contracts or arrangements with the Guarantor or any subsidiary of the Guarantor during the year ended 31 December 2018, in which a director of the Guarantor was materially interested and which were significant in relation to the Group's business. The interests of the Directors and the Company Secretary of the Guarantor and their spouses and minor children in the share capital of the Guarantor, all of which were beneficial, unless otherwise indicated below as follows:
Ordinary Share Ordinary Share Shares Options Total Shares Options Total Number Number Number Number Number Number
31 December 2018 31 December 2017 Directors Gerry Behan ...... 58,839 - 58,839 58,379 - 58,379 -Deferred(1) ...... 14,905 - 14,905 10,636 - 10,636 Hugh Brady ...... 1,250 - 1,250 500 - 500 Gerard Culligan ...... ------Karin Dorrepaal ...... ------Joan Garahy ...... 1,050 - 1,050 1,050 - 1,050 James C. Kenny ...... ------Marguerite Larkin(2) ...... 1,500 - 1,500 - - - Brian Mehigan(3) ...... 40,334 52,266 92,600 40,334 57,694 98,028 -Deferred(1) ...... - 10,583 10,583 - 7,757 7,757 Tom Moran ...... 539 - 539 - - - Con Murphy ...... 7,721 - 7,721 7,721 - 7,721 Christopher Rogers(4) ...... 640 - 640 - - - Edmond Scanlon ...... 9,611 5,056 14,667 9,611 2,083 11,694 -Deferred(1) ...... - 4,481 4,481 - 2,084 2,084 Philip Toomey ...... 6,000 - 6,000 6,000 - 6,000 Company Secretary Ronan Deasy(5) ...... 3,230 1,528 4,758 3,230 - 3,230 -Deferred ...... - 1,862 1,862 - 1,231 1,231
(1) The deferred shares and share options above, relate to 25% of the Executive Directors 2016 and 2017 STIP awards and 50% of the 2014 and 2015 LTIP award (vested in March 2017 and 2018 respectively). These awards are subject to a two year deferral period and will be delivered in shares/share options in March 2019 and March 2020 respectively. (2) Marguerite Larkin was appointed to the Board on 30 September 2018 and her opening shareholdings are reflected as at that date. (3) Brian Mehigan retired from the Board on 28 December 2018 and his closing shareholding above is reflected as at that date. (4) Christopher Rogers was appointed to the Board on 8 May 2018 and his opening shareholdings are reflected as at that date. (5) Ronan Deasy was appointed as Company Secretary on 1 March 2018 and his opening shareholdings are reflected as at that date.
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SUBSTANTIAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Substantial Shareholders
The Guarantor's shares are listed on Euronext Dublin and the London Stock Exchange plc. The directors of the Guarantor have been notified of the following shareholdings of 3% or more in the issued share capital of the Guarantor:
Number Percentage Shareholder Held Shareholding Kerry Co-operative Creameries Limited (KCC) ...... 24,048,456 13.6% Blackrock Investment Management ...... 8,842,489 5.0%
Other than the aforementioned shareholdings, the Group has not been notified of any interest of 3% or more in the issued share capital of the Guarantor.
Transactions with Directors
In the ordinary course of their business as farmers, certain Directors have traded on standard commercial terms with the Group's Agribusiness division. Aggregate purchases from, and sales to, these Directors amounted to €0.2 million (2017: €0.3 million) and €0.1 million (2017: €0.1 million) respectively. The trading balance outstanding to the Group at 31 December 2018 was €0.1 million (2017: €nil).
All transactions with directors were on standard commercial terms. The amounts outstanding are unsecured and will be settled in cash. No expense has been recognised in the year for bad or doubtful debts in respect of amounts owed by Directors.
Transactions between the Guarantor and its Subsidiaries
Transactions in the 2018 financial year between the Guarantor and its Subsidiaries included dividends received of €177.5 million (2017: dividends received of €120.0 million), cost recharges of €19.6 million (2017: €11.5 million) and trade and other receivables of €94.1 million (2017: €115.8m). The Guarantor has also provided a guarantee in respect of the Facilities as listed within Business Description – Description of Existing Financing Arrangements.
Transactions with Other Related Parties
KCC is considered to be a related party of the Group as a result of its significant shareholding in the Guarantor. During 2018, dividends of €15.6 million (2017: €13.9 million) were paid to KCC based on its shareholding. A subsidiary of Kerry Group plc traded product to the value of €0.1 million (2017: €0.2 million) on behalf of KCC.
Transactions with associates and joint ventures
Details of transactions and balances outstanding with the associates and joint ventures are as follows:
Amounts receivable Rendering Sale of at 31st of Services goods December 2018 €'m Associates ...... - (0.3) - Joint Ventures ...... - - -
2017 €'m Associates ...... - (0.8) (0.1) Joint Ventures ...... - - -
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These trading transactions are undertaken and settled at normal trading terms. No loans were advanced or outstanding in 2018 and 2017 and no interest was received.
Transactions with Key Management Personnel
The members of the Board are deemed to be key management personnel of the Guarantor, as they are responsible for planning, directing and controlling the activities of the Group.
In addition to their salaries and short-term benefits, the Group also contributes to post-retirement defined benefit, defined contribution and savings plans on behalf of the Executive Directors. These directors also participate in the Group's Long Term Incentive Plan (LTIP). For more information, see notes 26 and 28 to the Group's audited consolidated financial statements as at and for the year ended 31 December 2018, which are incorporated by reference in this Offering Circular.
The remuneration cost of key management personnel is as follows:
Year ended 31 December 2018 2017 (audited) (€ million) Short-term benefits (salaries, fees and other short-term benefits) ...... 6.7 8.0 Post-retirement benefits ...... 0.6 0.8 LTIP accounting charge ...... 2.4 2.9 Total ...... 9.7 11.7
For more information on the details of the remuneration of the Group's individual directors, together with the number of Guarantor shares owned by them and their interest in the LTIP, see "Management of the Group— Remuneration of Directors."
The aggregate amount of gains accruing to Executive Directors on the exercise of share options in 2018 is €1.1m (2017: €4.6m). Dividends totalling €0.1 million in 2018 (2017: €0.1 million) were also received by key management personnel during the financial year, based on their personal interests in the Guarantor's shares.
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TAXATION
The following is a general description of certain tax considerations in the Republic of Ireland relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes in the Republic of Ireland or elsewhere. Prospective purchasers of the Notes should consult their own tax advisers as to the consequences under the tax laws of the country in which they are resident for tax purposes and the tax laws of the Republic of Ireland for the acquisition, holding, sale and redemption of the Notes and receiving payments of interest, principal and/or other amounts under the Notes.
This summary is based on the law in effect on the date of this Offering Circular and its prevailing interpretations available on or before this date. It is subject to any change in the law or interpretations that may take effect after such date, which could apply retroactively and therefore affect the continued validity of this summary, which will not be updated to reflect any such change. This summary assumes that each transaction with respect to the Notes is conducted at arm's length.
Investors should also bear in mind that the appointment by an investor in the Notes, or any person through which an investor holds the Notes, of a custodian, collection agent or similar person in relation to such Notes in any jurisdiction may have tax implications. Investors should consult their own tax advisers regarding the tax consequences related to any such appointment.
The Republic of Ireland
Withholding Tax
In general, tax at the standard rate of income tax (currently 20 per cent.), is required to be withheld from payments of Irish source interest which could include interest paid on the Notes or amounts representing such interest paid under the Guarantee of the Notes. However, a number of exemptions from withholding on interest payments exist.
Interest paid on a quoted Eurobond
An exemption from withholding on interest payments exists under Section 64 of the Taxes Consolidation Act, 1997 (the "1997 Act") for certain interest bearing securities ("quoted Eurobonds") issued by a body corporate (such as the Issuer) which are quoted on a recognised stock exchange (which would include Euronext Dublin).
Any interest paid on such quoted Eurobonds can be paid free of withholding tax provided:
(a) the person by or through whom the payment is made is not in Ireland; or
(b) the payment is made by or through a person in Ireland, and either:
(i) the quoted Eurobond is held in a clearing system recognised by the Irish Revenue Commissioners (Euroclear and Clearstream, Luxembourg are so recognised), or
(ii) the person who is the beneficial owner of the quoted Eurobond and who is beneficially entitled to the interest is not resident in Ireland and has made a declaration to a relevant person (such as a paying agent in Ireland) in the prescribed form.
So long as the Notes are quoted on a recognised stock exchange and are held in Euroclear and/or Clearstream, Luxembourg, interest on the Notes can be paid by the Issuer and any paying agent acting on behalf of the Issuer without any withholding or deduction for or on account of Irish income tax.
Encashment tax
In certain circumstances, Irish tax may be required to be withheld at the standard rate of income tax (current twenty per cent) from interest on any Note where such interest is collected or realised by a bank or other agent in Ireland on behalf of any Noteholder. There is an exemption from encashment tax where the beneficial owner of the interest is not resident in Ireland and has made a declaration to this effect in the prescribed form to the encashment agent or bank.
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Taxation of Noteholders
Notwithstanding that a Noteholder may receive interest on the Notes free of withholding tax, the Noteholder may still be liable to pay Irish income tax on Irish source income such as interest or discount on the Notes issued. Noteholders resident or ordinarily resident in Ireland who are individuals may be liable to pay Irish income tax, pay related social insurance ("PRSI") and the universal social charge in respect of interest they receive on the Notes. Noteholders who are non-resident individuals may also be liable to pay Irish income tax and the universal social charge in respect of interest they receive on the Notes. Ireland operates a self- assessment system in respect of income tax and any person, including a person who is neither resident nor ordinarily resident in Ireland, with Irish source income comes within its scope.
However, income received in the following circumstances will not be subject to Irish income tax, in accordance with Section 198(1)(c) 1997 Act:
(a) Interest paid on a quoted Eurobond (see Withholding Tax section above) by a body corporate (such as the Issuer) to a person not resident in Ireland and resident for the purposes of tax in an EU Member State (other than Ireland) or a country which has a comprehensive double tax treaty with Ireland (a Relevant Territory).
(b) Interest paid on a quoted Eurobond (see Withholding Tax section above) where the recipient is a body corporate controlled in accordance with section 172D(3)(b)(ii) 1997 Act (broadly, a non-Irish resident company controlled by persons tax resident in a Relevant Territory which is not controlled by persons not so tax resident).
(c) Interest paid on a quoted Eurobond (see Withholding Tax section above) where the recipient is a body corporate the principal class of shares of which are shares to which section 172D(3)(b)(iii) applies (broadly, a company whose shares, or the shares of its 75% holding company, or where the company is wholly held by two or more companies the shares of each of those companies, are substantially and regularly traded on a recognised stock exchange of a Relevant Territory).
(d) Interest paid by the Issuer in the ordinary course of its trade or business to a body corporate tax resident in a Relevant Territory and where such country of residence imposes a tax that generally applies to interest receivable in that country from sources outside that country.
(e) Interest paid by the Issuer in the ordinary course of its trade or business to a body corporate tax resident in a Relevant Territory, where the interest is exempted from the charge to Irish tax under the specific provisions of a double tax treaty between Ireland and the country of residence of the recipient.
(f) Discounts arising on securities issued in the ordinary course of the Issuer's trade or business where the person receiving the discount is not Irish tax resident and is a tax resident of a Relevant Territory.
Where the above exemptions do not apply, relief from Irish income tax may also be available under the specific provisions of a double tax treaty between Ireland and the country of residence of the recipient. Notwithstanding these exemptions from income tax, a body corporate recipient that carries on a trade in Ireland through a branch or agency in respect of which the Notes are held or attributed may have a liability to Irish corporation tax on the interest.
Noteholders receiving interest on the Notes which does not fall within the above exemptions may be liable to Irish income tax, PRSI and the universal social charge on such interest.
There is a statutory obligation to account for Irish tax, where it applies, on a self-assessment basis and there is no requirement for the Irish Revenue Commissioners to raise an assessment.
Capital Gains Tax
A Noteholder will not be subject to Irish tax on capital gains on a disposal of Notes unless such Noteholder is either resident or ordinarily resident in Ireland or carries (or carried) on a trade in Ireland through a branch or agency in respect of which the Notes were used or held.
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Capital Acquisitions Tax
A gift or inheritance comprising of Notes will be within the charge to capital acquisitions tax (which subject to available exemptions and reliefs is levied at a rate of 33 per cent. above certain tax free thresholds) if either (i) the disponer or the donee/successor in relation to the gift or inheritance is resident or ordinarily resident in Ireland (or, in certain circumstances, if the disponer is domiciled in Ireland irrespective of his residence or that of the donee/successor) or (ii) if the Notes are regarded as property situate in Ireland. Registered Notes are generally regarded as situated where the principal register of Noteholders is maintained or is required to be maintained, but the Notes may be regarded as situated in Ireland regardless of their physical location or the location of the register as they represent a debt owed by an Irish incorporated debtor which may be secured over Irish property. Accordingly, if such Notes are comprised in a gift or inheritance, the gift or inheritance may be within the charge to tax regardless of the residence status of the disponer or the donee/successor.
Stamp Duty
No Irish stamp duty will be payable on the issue of the Notes.
No Irish stamp duty will be payable on the transfer of Notes as the Notes satisfy the conditions of the loan capital exemption (as set out in Section 85 of the Stamp Duties Consolidation Act 1999).
Value Added Tax
There is no Irish VAT payable in respect of payments in consideration for the issue of the Notes or for the transfer of the Notes.
Foreign Account Tax Compliance Act
Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a "foreign financial institution" may be required to withhold on certain US source payments that it makes to persons that fail to meet certain certification, reporting, or related requirements. A number of jurisdictions (including Ireland) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA ("IGAs"), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally only be required to withhold on US source income payments made to entities that either are, or are presumed to be, non-participating foreign financial institutions. Future guidance may expand this withholding requirement to apply to certain foreign source payments (“passthru payments”) Such withholding would not apply prior to the date that is two years after the date on which final regulations defining foreign passthru payments are published in the U.S. Federal Register, and Notes characterised as debt (or which are not otherwise characterised as equity and have a fixed term) for U.S. federal tax purposes that are issued on or prior to the date that is six months after the date on which final regulations defining “foreign passthru payments” are filed with the U.S. Federal Register generally would be “grandfathered” for purposes of FATCA withholding unless materially modified after such date (including by reason of a substitution of the issuer). However, if additional notes (as described under "Terms and Conditions—Further Issues") that are not distinguishable from previously issued Notes are issued after the expiration of the grandfathering period and are subject to withholding under FATCA, then withholding agents may treat all Notes, including the Notes offered prior to the expiration of the grandfathering period, as subject to withholding under FATCA. Holders should consult their own tax advisors regarding how these rules may apply to their investment in the Notes.
Common Reporting Standard ("CRS")
The CRS framework was first released by the OECD in February 2014. On 21 July 2014, the Standard for Automatic Exchange of Financial Account Information in Tax Matters (the "Standard") was published, involving the use of two main elements – the Competent Authority Agreement (the " CAA") and the CRS.
The aim of the Standard is to provide for the annual automatic exchange of information between governments of financial account information reported to them by local Financial Institutions ("FIs") relating to account holders tax resident in other participating countries to assist in the efficient collection of tax. The OECD, in developing the CAA and CRS, have used FATCA concepts and as such the Standard is broadly similar to the FATCA requirements, albeit with numerous alterations.
Ireland is a signatory jurisdiction to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, which was entered into by Ireland in its capacity as a signatory to the
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Convention on Mutual Administrative Assistance in Tax Matters and which relates to the automatic exchange of financial account information in respect of CRS, while sections 891F and 891G of the 1997 Act and regulations made thereunder contain measures necessary to implement the CRS internationally and across the European Union, respectively. The Returns of Certain Information by Reporting Financial Institutions Regulations (the "CRS Regulations"), giving effect to the CRS from 1 January 2016, came into effect on 31 December 2015.
Under the CRS Regulations, reporting financial institutions, which may include the Issuer, are required to collect certain information on account holders and on certain controlling persons (as defined in the CRS Regulations) in the case of the account holder being an entity, as defined for CRS purposes, to identify accounts which are reportable to the Irish tax authorities. The Irish tax authorities shall in turn exchange such information with their counterparts in participating jurisdictions. Where a security is held in a clearing system it is understood that either the clearing system itself or the relevant clearing participants may be considered FIs and accordingly the Issuer may not have reportable obligations in respect of a security holder holding such a security. In that event, the Issuer would make a nil return for that period to the Irish Revenue Commissioners.
EU Mandatory Disclosure Rules
Council Directive 2018/822/EU ("DAC6"), which is effective from 25 June 2018, requires Member States to introduce a common mandatory disclosure regime by 1 January 2020 and to share all reports received with each other. DAC6 imposes mandatory reporting requirements on EU-based tax advisors, accountants, lawyers, banks, financial advisors and other intermediaries who design, market, organise, make available for implementation or manage the implementation of certain cross-border arrangements. It also covers persons who provide aid, assistance or advice in relation to certain cross-border arrangements, where they can be reasonably expected to know that they have performed that function. If the intermediary is located outside the EU or is bound by legal professional privilege, the obligation to report passes to the taxpayer.
The transactions contemplated under this Offering Circular may fall within the scope of mandatory disclosure rules under DAC6 or an equivalent provision under Irish law and thus may qualify as reportable (cross-border) arrangements within the meaning of such provisions. Should the relevant transactions qualify, any person that falls within the definition of an “intermediary” may be obliged to report the transactions to fiscal authorities under these provisions. As DAC6 has not yet been implemented in the law of the Republic of Ireland, the actual scope of the mandatory disclosure rules remains unclear as at the date of this Offering Circular.
The proposed financial transactions tax (the "FTT")
On 14 February 2013, the European Commission published a proposal (the "Commission's Proposal") for a directive for a common FTT in Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovenia, Slovakia and Spain (each, other than Estonia, a "participating Member State").
The Commission's Proposal has very broad scope and could, if introduced, apply to certain dealings in the Notes (including secondary market transactions) in certain circumstances. The Commission’s Proposal should however not apply to certain primary market transactions (such as the issuance, allotment or subscription) in certain financial instruments including bonds or other forms of securitised debt.
Under the Commission's Proposal the FTT, in its current form, could apply in certain circumstances to persons both within and outside of the Participating Member States. Generally, it could apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, "established" in a Participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a Participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a Participating Member State.
However, the FTT proposal remains subject to continued negotiation between Participating Member States. The current state of play was discussed at a meeting of the Council of the European Union (Economic and Financial Affairs) ("ECOFIN") on 14 June 2019. Participating Member States indicated that they are discussing an option (based on a submission by Germany) of an FTT based on the French model of the tax (which is predominately aimed at the taxing of transactions involving domestically issued shares) and about the possible mutualisation of the revenues among the Participating Member States as a contribution to the EU Budget.
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In order to reach a final agreement among the Participating Member States, further work in the Council and its preparatory bodies is required in order to ensure that the competences, rights and obligations of non- participating EU member states are respected. Its scope and application may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may also decide to participate. The adoption of any revised Directive requires the unanimous agreement of participating Member States, after consultation with the European Parliament.
Prospective holders of Notes are advised to seek their own professional advice in relation to the potential implications of the FTT.
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SUBSCRIPTION AND SALE
Coöperatieve Rabobank U.A. (Rabobank), HSBC Bank PLC, Merrill Lynch International and NatWest Markets N.V. (together, the "Joint Lead Managers") and Allied Irish Banks p.l.c., Barclays Bank PLC, The Governor and Company of the Bank of Ireland, BNP Paribas, Citigroup Global Markets Limited, Danske Bank A/S, Deutsche Bank AG, London Branch, Goldman Sachs International, J&E Davy, J.P. Morgan Securities plc and Mizuho International plc (the "Co-Lead Managers" and, together with the Joint Lead Managers, the "Managers") have, pursuant to a Subscription Agreement dated 18 September 2019, jointly and severally agreed with the Issuer and the Guarantor, subject to the satisfaction of certain conditions, to subscribe for the Notes at 98.991 per cent. of their principal amount, less any applicable commissions and expenses as agreed between the Issuer, the Guarantor and the Managers. In addition, the Issuer has agreed to reimburse the Managers for certain of their expenses in connection with the issue of the Notes. The Subscription Agreement entitles the Managers to terminate it in certain circumstances prior to payment being made to the Issuer.
Certain of the Managers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services for the Issuer, the Guarantor and their affiliates in the ordinary course of business. In addition, in the ordinary course of their business activities, the Managers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers; such investments and securities activities may involve securities and/or instruments of the Issuer, the Guarantor and their affiliates. Certain of the Managers or their affiliates that have a lending relationship with the Issuer, the Guarantor or their affiliates, routinely hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, such Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes. Any such short positions could adversely affect future trading prices of the Notes. The Managers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
United States
The Notes have not been and will not be registered under the Securities Act and the Notes are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S.
Each Manager has represented, warranted and agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Notes, (a) as part of their distribution at any time or (b) otherwise, until 40 days after the later of the commencement of the offering and the issue date of the Notes, within the United States or to, or for the account or benefit of, U.S. persons, and that it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meaning given to them by Regulation S under the Securities Act.
In addition, until 40 days after the commencement of the offering, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.
Prohibition of Sales to EEA Retail Investors
Each Manager has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the European Economic Area. For the purposes of this provision the expression "retail investor" means a person who is one (or more) of the following:
(a) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or
(b) a customer within the meaning of Directive 2002/92/EC (as amended), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
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United Kingdom
Each Manager has represented, warranted and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not or, in the case of the Guarantor would not, if it was not an authorised person, apply to the Issuer or the Guarantor; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
The Republic of Ireland
Each Manager has represented, warranted and undertaken that it has not offered or sold, and will not offer, sell, underwrite the issue of, or act in Ireland in respect of the Notes, other than in conformity with:
(a) Irish European Union (Markets in Financial Instruments) Regulations 2017 (as amended), including without limitation Regulation 5 thereof, any codes of conduct made thereunder and the provisions of the Investor Compensation Act 1998 (as amended);
(b) the Irish Central Bank Acts 1942 – 2018 (as amended) and any codes of practice made under Section 117(1) of the Central Bank Act 1989 (as amended);
(c) the Prospectus Regulation (EU) 2017/1129, and any rules and guidance issued by the Central Bank of Ireland under Section 1363 of the Companies Act 2014 (as amended) of Ireland (the Companies Act); and
(d) the Market Abuse Regulation (EU 596/2014) (as amended), the European Union (Market Abuse) Regulations 2016 (as amended) and any rules and guidance issued under Section 1370 of the Companies Act by the Central Bank.
Japan
Each Manager has represented and agreed that the Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the “FIEA”) and each Dealer represents and agrees that it will not offer or sell the Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.
Hong Kong
Each Manager has represented and agreed that:
(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, the Notes (except for Notes which are a "structured product" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong) (the "SFO") other than (i) to persons whose ordinary business is to buy or sell shares or debentures (whether as principal or agent); or (ii) to “professional investors” as defined in the SFO and any rules made under the SFO; or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the "C(WUMP)O") or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and
(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong
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Kong) other than to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.
Singapore
Each Manager has represented and agreed that the Offering Circular has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Manager has represented and agreed that it has not offered or sold the Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell the Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, the Offering Circular or any other document or material in connection with the offer or sale or invitation for subscription or purchase of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore (as amended, the "SFA")) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or to any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
In connection with Section 309B of the SFA and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the "CMP Regulations 2018") the Notes shall be prescribed capital markets products (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in the Monetary Authority of Singapore (the "MAS") Notice SFA 04-N12: Notice on the Sale of Investment Products and in the MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
General
Persons into whose possession this Offering Circular comes are required by the Issuer, the Guarantor and/or the Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Offering Circular or any other offering material relating to the Notes in all cases at their own expense.
No action has been taken in any jurisdiction that would permit a public offering of any of the Notes, or the possession or distribution of the Offering Circular or any other offering material, in any country or jurisdiction in which an action for that purpose is required.
The Issuer, the Guarantor and the Managers do not represent that this Offering Circular may be lawfully distributed or that the Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering.
Each Manager has represented, warranted and agreed to the Issuer and the Guarantor that it complies to the best of its knowledge and belief in all material respects with and will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers Notes or possesses, distributes or publishes the Offering Circular or any other offering material relating to the Notes.
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GENERAL INFORMATION
Authorisation
The creation and issue of the Notes has been authorised by a resolution of the Board of Directors of the Issuer dated 23 August 2019. The giving of the Guarantee of the Notes has been authorised by a resolution of the Board of Directors of the Guarantor dated 7 August 2019.
Legal and Arbitration Proceedings
There are no governmental, legal or arbitration proceedings, (including any such proceedings which are pending or threatened, of which the Issuer or the Guarantor is aware), which may have, or have had during the 12 months prior to the date of this Offering Circular, a significant effect on the financial position or profitability of the Issuer or the Guarantor.
Significant/Material Change
Since 31 December 2018 there has been no material adverse change in the prospects of the Issuer and the Guarantor. Since 30 June 2019, there has been no material adverse change or any significant change in the financial performance of the Issuer or the Guarantor.
Auditors
The financial statements of the Guarantor as at and for the years ended 31 December 2018 and 31 December 2017, prepared in accordance with International Financial Reporting Standards as adopted by the EU and incorporated by reference in this Offering Circular, have been audited by PricewaterhouseCoopers Chartered Accountants & Statutory Audit Firm ("PwC"), an independent firm of Chartered Accountants, are members of the Institute of Chartered Accountants in the Republic of Ireland and are qualified to act in the Republic of Ireland. PwC has no material interest in the Issuer or the Guarantor.
Documents on Display
Copies of the following documents may be inspected, in physical or electronic form, during normal business hours at the offices of registered office of the Issuer and the Specified Office of the Principal Paying Agent for 12 months from the date of this Offering Circular:
(i) the constitutive documents of the Issuer;
(ii) the constitutive documents of the Guarantor;
(iii) the Agency Agreement;
(iv) the Trust Deed which includes the Guarantee of the Notes;
(v) the audited financial statements of the Guarantor as at and for the years ended 31 December 2018 and 31 December 2017; and
(vi) the unaudited interim financial statements of the Guarantor as at and for the six months ended 30 June 2019.
Yield
On the basis of the issue price of the Notes of 98.991 per cent. of their principal amount, the gross real yield of the Notes is 0.730 per cent. on an annual basis.
Conflict of Interest
Certain of the Managers have, directly or indirectly through affiliates, provided investment and commercial banking, financial advisory and other services to the Issuer and or the Guarantor and their affiliates from time to time, for which they have received monetary compensation. Certain of the Managers may from time to time also enter into swap and other derivative transactions with the Issuer and or the Guarantor and their affiliates. In addition, certain of the Managers and their affiliates may in the future engage in investment banking,
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commercial banking, financial or other advisory transactions with the Issuer and or the Guarantor or their affiliates.
ISIN and Common Code
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN is XS2042667944, the common code is 204266794, the CFI is DBFNFR and the FISN is KERRY GROUP FIN/.625EUR NT 20290920.
The address of Euroclear is Watling House, 33 Cannon Street, London EC4M 5SB and the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy L-1855 Luxembourg.
Websites
Any website mentioned in this document does not form part of the Offering Circular.
Availability of Offering Circular
This Offering Circular is available on the Central Bank of Ireland's website at www.centralbank.ie.
Listing Agent
Irish Listing Agent J&E Davy, trading as Davy, is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official List or to trading on the Global Exchange Market.
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Issuer
Kerry Group Financial Services Prince's Street Tralee Co. Kerry Republic of Ireland
Guarantor
Kerry Group plc Prince's Street Tralee Co. Kerry Republic of Ireland
Joint Lead Managers
Coöperatieve Rabobank U.A. HSBC Bank plc Merrill Lynch International (Rabobank) 8 Canada Square 2 King Edward Street Croeselaan 18 London E14 5HQ London EC1A 1HQ 3521 CB Utrecht United Kingdom United Kingdom The Netherlands
NatWest Markets N.V. Claude Debussylaan 94 Amsterdam 1082MD Netherlands
Co-Lead Managers
Allied Irish Banks, p.l.c. Barclays Bank PLC The Governor and Company 10 Molesworth Street 5 The North Colonnade of the Bank of Ireland Dublin 2 Canary Wharf 40 Mespil Road D02 R126 London E14 4BB Dublin 4 Ireland United Kingdom Ireland
BNP Paribas Citigroup Global Markets Danske Bank A/S 10 Harewood Avenue Limited Holmens Kanal 2-12 London NW1 6AA Citigroup Centre DK-1092 Copenhagen K United Kingdom Canada Square Denmark Canary Wharf London E14 5LB United Kingdom
Deutsche Bank AG, London J&E Davy Goldman Sachs Branch Davy House International Winchester House 49 Dawson Street Peterborough Court 1 Great Winchester Street Dublin 2 133 Fleet Street London EC2N 2DB Ireland London EC4A 2BB United Kingdom United Kingdom
J.P. Morgan Securities plc Mizuho International plc 25 Bank Street Mizhuo House Canary Wharf 30 Old Bailey London E14 2JP London EC4M 7AU United Kingdom United Kingdom
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Auditors to the Issuer and the Guarantor
PricewaterhouseCoopers Chartered Accountants & Statutory Audit Firm 1 Spencer Dock, North Wall Quay, Dublin 1 Ireland
Trustee Principal Paying Agent Registrar and Transfer Agent Deutsche Trustee Deutsche Bank AG, London Deutsche Bank Company Branch Luxembourg S.A. Limited Winchester House 2, Boulevard Konrad Winchester House 1 Great Winchester Street Adenauer 1 Great Winchester Street London EC2N 2DB L-1115 Luxembourg London EC2N 2DB United Kingdom Luxembourg United Kingdom
Listing Agent
J&E Davy Davy House 49 Dawson Street Dublin 2 Republic of Ireland
Legal Advisers
To the Issuer and the Guarantor as to English law: Clifford Chance LLP 10 Upper Bank Street London E14 5JJ United Kingdom
To the Managers and the Trustee To the Managers as to English law: as to Irish law: Freshfields Bruckhaus Deringer LLP A&L Goodbody 65 Fleet Street International Financial Services Centre London EC4Y 1HS North Wall Quay United Kingdom Dublin 1 Republic of Ireland
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