The battle to buy United Biscuits apparently now has an Eastern flavour.
Chinese state-backed conglomerate Bright Food Group is reportedly in exclusive talks to buy United Biscuits, the UK firm behind brands like McVitie’s and McCoy’s.
The entry of Bright Food into the race to buy United Biscuits, which looks set to be one of the most sought-after assets in the food sector, has raised eyebrows and is sure to provoke some of the more jingoistic elements of the UK press following the controversy over Kraft Foods’ acquisition of Cadbury. UK Business Secretary Vince Cable has been said to want to tighten up the country’s takeover regulations to make it harder for UK businesses to fall into ‘foreign’ hands. Patriots and Mr Cable, however, would do well to note that United Biscuits’ current owners are the French private-equity firm PAI Partners and the US buy-out house Blackstone.
Some of the food industry’s biggest names – Kraft, Kellogg, Campbell Soup Co. and PepsiCo – have been linked to United Biscuits, while there remains a distinct possibility that another private-equity firm would be interested in picking up the Penguin biscuits owner. United Biscuits, with its portfolio of biscuits, cakes and crisps, could also be split with one buyer taking on the biscuits arm and another snapping up the snacks.
The news that Bright Food is holding talks to buy – on the face of it – the whole business is an intriguing development and will only add to the speculation surrounding a business said to be worth US$3.2bn.
What Bright Food’s interest does underline is that, for all the Western investment in the emerging markets of the East, the likes of China and India have been developing robust domestic firms of their own – and companies that are themselves keen to expand overseas.
While there are signs that M&A activity has stalled as we have moved through 2010, United Biscuits is one of a handful of international branded businesses in the food industry that are seemingly up for sale.
Pringles is a global snacks brand that could soon be on the block. It emerged last week that the brand’s owner, consumer goods giant Procter & Gamble, had held talks to merge the business with US snack firm Diamond Foods, the owner of upmarket crisp brand Kettle.
The talks broke off without a deal but Pringles has long seemed an anamoly in a P&G portfolio that includes non-food brands like Gillette, Ariel and Charmin. That P&G was seriously mulling a deal only makes it seem likely that Pringles will soon find a new home.
The future of yoghurt brand Yoplait is also the topic of continuing speculation. One of the brand’s shareholders, United Biscuits’ owner PAI Partners, is looking to sell its half of the business. Its venture partner, French dairy co-op Sodiaal, is keen to keep a stake of some kind in Yoplait and the coming months is likely to see frenzied speculation over who would be interested in a business with sales of EUR3.5bn (US$4.7bn) and a presence in over 70 countries.
General Mills, which holds the US licence for Yoplait, is likely to be a front-runner in the race for PAI’s stake. The US yoghurt market remains relatively under-developed, certainly when compared to markets in Europe and General Mills’ stewardship of the brand across the Atlantic should put it in pole position. Indeed, reports in the UK have linked General Mills to buying the business.
However, General Mills and Sodima, the licencing arm of Sodiaal, are locked in discussions over the future of the US licence for Yoplait. According to General Mills, Sodima wants to terminate the licencing deal; the US food giant has argued that the agreement stipulates that only it can end the partnership. General Mills has filed for arbitration on the issue and talks are “ongoing”. The outcome of those discussions will have a big bearing on the future of Yoplait and the likes of Nestle and Arla Foods, said to be some of the potential suitors for the yoghurt maker, will be watching with interest.
This morning, we also saw a significant piece of potential M&A in the retail sector. Wal-Mart has made a preliminary offer to buy South African retailer Massmart Holdings.
Massmart has nine chains across Africa, with the bulk of its stores in South Africa and sells grocery and non-food, including general merchandise and home improvement products. It has long been linked to Wal-Mart, the world’s largest retailer.
Andy Bond, the former boss of Asda, Wal-Mart’s UK arm and now in charge of the retail giant’s business in the UK and Africa, said South Africa was a “compelling growth opportunity” for the business.
The potential transaction is sure to be closely watched by trade unions in South Africa. Massmart cut over 1,000 jobs in June and one union reportedly accused the business of preparing the ground for a deal with Wal-Mart. With another South African retailer, Pick n Pay, seeing strike action from its staff last week, Massmart could face the threat of industrial action in the wake of today’s announcement.