In the spotlight: Big Bear a "good fit" for Raisio
Raisio has purchased big Bear today
The announcement this morning that Raisio has purchased UK-based Big Bear Group, owner of brands such as Sugar Puffs cereals and Fox Confectionery, comes as no surprise, given that the deal has been rumoured for some time.
The EUR95.3m (US$130m) deal will see Big Bear integrated into Raisio's Western European brand operations. The purchase will allow the Finnish company to gain a stronger foothold in the branded snack and breakfast markets in the UK and Western Europe, as well as strengthen its position in the UK confectionery market.
For Big Bear, the sale will give value to its shareholders - an alternative to the IPO that the company had looked into early last year.
Carnegie Investment Bank analyst Timo Heinonen told just-food today that this indeed appeared to be what had driven the deal.
"The motivation is that Raisio is a food company with a focus on healthy mobile snacking and health food is good for the company. They are targeting to expand their market position, they are very strong in Scandanavia and they do already have a position in the UK - they bought Glisten about a year ago."
Raisio purchased Glisten in February last year for EUR22.8m. It was hailed by Glisten chairman David Wallis as a "win-win" deal for both companies but more importantly it was Raisio's first physical presence in the UK.
Following today's announcement, Raisio CEO Matti Rihko told just-food that Big Bear will "fit well" with its existing UK business.
"The intention is to grow in the healthy ecological snacking business in Europe and we thought that Fox fits into that picture, but in particular we are very enthusiastic about Honey Monster [the fictional character associated with Sugar Puffs]," Rihko said. "It is a strong brand which is a strong player in the breakfast and snack category. And it also fits very well with our existing business in the UK, so we will become stronger in confectionery but especially we are happy about becoming stronger in the snack bars and breakfast category."
He added: "If you define [snacks] as cold breakfast cereal, we are in that category already in Finland with healthy products. Elovena is the second strongest food brand in Finland, but the way in which we define snacking is actually breakfast and in-between meals, so therefore we think cold breakfast cereals fit very well for ourselves, who have historically been stronger in hot breakfast cereals."
Heinonen agrees that the deal is a good move for Raisio.
"I think that strategically it is excellent because of course Raisio is a multi-billion pound food company," Heinonen said. "Of course it would be nice if they acquired Nestle but it is a hundred times bigger, so in my view this is a good move.
He added: "[Big Bear] has strong profitability and it will fit well with Raisio's portfolio. Of course there are also cross-selling opportunities, Raisio can sell more Big Bear products in Scandinavia, there is a lot more they can do in Scandinavia and of course Raisio can sell more in the UK, healthy products for example, that they sell in Finland."
Big Bear was founded in 2003 and owns the brands Honey Monster, Honey Waffles and Sugar Puffs. The company's product range includes breakfast cereal products mainly for children, as well as healthy snack bars and cereal products with no artificial flavours or colours.
In the financial year ended to the end of August 2010, Big Bear's net sales were EUR65.1m and EBITDA EUR13.6m.
The firm is owned by its senior management together with a group of institutional investors.
Big Bear finance director Keith Buchanan told just-food that the sale to Raisio was a way of giving value to its shareholders.
"We did look at an IPO at the beginning of last year and we pulled it because the price wasn't right at the time and we have been looking at options since then really and a trade sale gave us the best value," Buchanan said.
"It is a way of giving value to some of our shareholders. An IPO was one way of giving them value and this is another, giving them value going forward," he added.
The finance chief confirmed that the company had been approached by a number of groups in addition to Raisio, but declined to give further details.
"This was the best option available to us," he said.
Commenting on the performance of the business, Buchanan said that Big Bear "has always been very successful" and has a good track record.
"Big Bear is seven years old, and Fox's confectionery was the first purchase from Northern Foods followed by Honey Monster from PepsiCo and both businesses have grown very rapidly under strategic management. They were orphans under big companies and they were revitalised under direct management with investment behind marketing in both cases and they've both been very successful."
Buchanan is hopeful that Big Bear will maintain its current strategy and organisational shape.
As for Raisio, Rikho is confident that if the right acquisition comes along - even outside of its current remit - it will certainly buy again. But the focus appears to be on the UK for the time being.
Raisio shares dropped 2.5% to EUR2.58 at 15:52pm GMT today.
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