Julian Wild, partner and head of law firm Rollit’s food and drink team, told FoodManufacture.co.uk Fox’s Biscuits and Burton’s prominent places in the UK biscuit market meant regulators would likely scrutinise any deal. “The Competition Commission would obviously have a pretty good look at it.”
Rumours that 2 Sisters, which acquired Fox’s when it bought Northern Foods in 2011, could be among the interested parties surfaced early on. Now these reports have become more concrete, although 2 Sisters has not been confirmed as exclusive bidder yet.
Wild said that, if confirmed, the move would make sense. Fox’s, being a UK trade buyer and branded biscuits operation with private equity funding, would be in the best position to take on Burton’s, whose brands include Jammie Dodgers and Maryland Cookies.
“Private equity on its own would have no synergies at all,” he said.
Debt
He said with the right backing, it was a good move for 2 Sisters, adding to its branded biscuits portfolio in the short term. However, if cleared it would raise questions about the firm’s debt level, given its recent acquisition of the vast bulk of Vion’s red meat and poultry processing operations.
“The bigger issue is taking on more debt, given the debt they have already got,” said Wild. In full-year financial results posted yesterday, 2 Sisters owner Boparan Holdings reported it had added £32.9M to annual debt levels, taking them to £566.7M.
Much would depend on the terms of the deal with CD&R and how long 2 Sisters intended to keep Fox’s on its books. One source close to the business said the move could ultimately represent a step in the direction of 2 Sisters divesting the biscuits side of its operations.
Could sell them on
The suggestion is once it had integrated both businesses into a single, stronger unit, it could sell them on as one entity at a considerable mark-up. That would allow 2 Sisters to focus on building its core meat processing operations.
“Once it has put Fox’s and Burton’s together and got a partner in CD&R it would be one step further down the road of divesting biscuits,” said the source. “I have never been a big fan of Burton’s. Its brands are pretty mature.”
That said, the firm has already stated that it sees potential in expanding into other categories.