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The private equity owners of United Biscuits, maker of Jaffa Cakes and Hula Hoops, are planning to split the UK’s biggest snack food group in two and run a staggered £2bn sale of the divisions, according to bankers.
The split sale – which would see Blackstone and France’s PAI hang on to the bigger biscuit business until 2013 – illustrates depressed appetite for big-ticket deals. The combined group last went on the block for about £2bn last year; the snacks asset would garner about £500m.
However, bankers stressed that the sellers continue to brainstorm disposal options. The last sales process came to an abrupt end last year when Bright Food, the Chinese foods group that had been in exclusive negotiations with a £2.5bn offer, including debt, walked away from the table.
Some bankers attributed the piecemeal sale to poor appetite. “There’s not a great deal of trade interest,” said one. “That leaves private equity, and there is no money there. So the deals happening at the moment are relatively small, and United Biscuits is a big beast.”
Several trade buyers were mooted last time United Biscuits went on the block, including US food groups Kraft, Campbell Soup and Kellogg’s as well as some emerging market operators. Some bankers suggest an approach would be logical for Kraft, the world’s biggest biscuit maker, now that it is to start making biscuits in the UK
But the US group is itself undergoing a split to create a global snacks company and other bankers reckon it may prefer to put money into emerging markets or look at other acquisition opportunities in Europe.
Bankers speculate that the UK too could see more biscuits come on to the table. The Fox’s biscuit business, with about £220m of sales, is now part of 2 Sisters, following the private company’s acquisition of Northern Foods.
But given 2 Sisters’ concentration on poultry and chilled meals, which together make up three-quarters of turnover, and private label goods, some see Fox’s – whose offerings include Party Rings – as a potential disposal. Countering that 2 Sisters, which is run by Ranjit Singh, aims to lift turnover from £2.3bn, following completion of the Brookes Avana acquisition, to £3bn by 2015.
As such, Mr Singh could act as a consolidator if Burton’s biscuits, which fell from private equity into the hands of lenders, comes back on to the market.
Blackstone and PAI hired JPMorgan and Goldman Sachs to run an auction for United Biscuits in July 2010.
Shanghai-based Bright Food, one of China’s biggest food groups with annual turnover of more than £4bn, entered into exclusive talks two months later.
United Biscuits, which employs 8,300 people at 11 locations in the UK, had revenues of £1.3bn and earnings before interest, tax, depreciation and amortisation of £230.8m last year. Net debt at the end of 2010 was £1.14bn. Blackstone, PAI and United Biscuits declined to comment.