Announcing news of a potential sale to the stock exchange this morning - with Uniq finally floated on the Alternative Investment Market (AIM) from 8am today - a Uniq statement said that the company’s board had received “a number of indications of interest from third parties regarding a potential offer for, or investment in, the company”, although it emphasised to shareholders that there was no guarantee of an offer or its terms.
“The board of Uniq has been informed that the 90.2% shareholder in the company [the pension fund] … has appointed Spayne Lindsay … as its corporate finance advisor and that it intends to undertake a process to realise all or part of its shareholding in the Company, as a result of which the company will enter into an offer period for the purposes of the City Code on takeovers and mergers.”
Building long-term value
The statement added that Uniq’s board, which is being advised by Investec Investment Banking, will “work closely” with the pension fund and its advisers to maximise value for shareholders, and focus on building Uniq’s long-term value.
Uniq ceo Geoff Eaton (pictured) outlined to FoodManufacture.co.uk the three potential outcomes a sale could involve: (1) a trade sale, given a "clear appetite for consolidation in the sector given the Northern Foods sale" (the buyer could then compulsorily purchase the 10% of shares outstanding) (2) a private equity investor, or (3) listing shares on the market.
Eaton said he wasn't surprised by news of a potential sale, stressing that Uniq had structured the pension deficit deal to give the trustees choices in this respect: "We have a quality asset and businesses, and I can see a number of parties being interested."
The novel ‘pension deficit for equity’ deal that led to the AIM flotation - necessary because fewer than 9.8% of shares are now in public hands, below the 25% threshold needed for a main market listing - has released Uniq from its £400m+ pension liability. As we went to press the firm's new share price stood at 64p/share.
Asked how much of a relief it was that the pension issue had been sorted, Eaton said: "It's huge, I've been working on this for the last six years, restructuring Uniq and dealing with issues from the Unigate days. It was a big challenge. The management at Uniq have done a great job bringing this about, and the company is now growing and profitable."
However, a period of consolidation would pre-empt any acquisitions, Eaton said: "It's very clear in the agreement with trustees that the board has full authority to run the business...we see a lot of opportunities in the near term and we have the resources to ensure delivery. I feel very unconstrained."
What's in it for shareholders?
Clear benefits to shareholders of the pension deal, said Eaton, stemmed from the fact that Uniq's shares are "no longer depressed by a huge pension fund deficit" while stakeholders could have confidence in a focused management team: he said that shareholders now have a firm with a market capitalisation of around £80m, compared with around £6m when the deal was first announced, even though they only held around 10% of the company.
One City analyst, who wished to remain anonymous, told FoodManufacture.co.uk on March 23: "At the last trading update we trimmed forecasts slightly, because of the desserts business contract loss", [worth £10m to Uniq] while at that point issues hadn't been resolved relating to the pension deal, he said.
"In the trading update prior to that Uniq reported that the sandwich business was trading well, although desserts are still under review."
The analyst said that he thought Uniq's Minsterley site was "still not trading at its full potential" , even after it pumped £10m into this site and a facility at Evercreech last spring, consolidating production at these locations after closing its Paignton desserts plant in November 2009.
Eaton said the desserts story was "quite mixed last year", with a range of successful product launches in 2010, kit investments in factories and new pack formats undercut by a near doubling of cream prices in the latter half of the year, which led to "disruption for both our customers and the marketplace", with consumers less willing to pay higher prices for desserts, followed by the contract loss.
Nonetheless, Eaton said Uniq had no plans to quit desserts altogether - with a review of the business underway and a reporting date of April 26 set. "We have a strong position in desserts and are doing a lot of good work."
He added that the market for premium desserts was booming and Uniq was "confident we can come up with a good plan".