France-based sugar refiner Tereos has said its move to buy UK distributor Napier Brown would boost its position in a "strategic" market.
Tereos is set to buy Napier Brown, which owns the Whitworths sugar brand and supplies sugar to manufacturers and retailers, from UK group The Real Good Food Co. for GBP34m (US$52.3m), it was announced this morning (29 April).
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Napier Brown's financial performance has come under pressure in recent months after a price dispute between Real Good Food and Associated British Foods' British Sugar, one of the UK's two domestic sugar producers.
However, Tereos said the acquisition of Napier Brown was "a key step" in the "further commercial development of the group".
The company, the world's fifth-largest sugar group, said the deal would allow it to offer its UK and international customers with "a broader range of products".
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Alexis Duval, president of Tereos' executive board, said: "The acquisition of Napier Brown represents a great opportunity for the group to reinforce our product and services offering in the food and beverage-processing and retail industry. The integration of Napier Brown in Tereos, one of the largest European and global sugar producers, will enable the company to secure a diversified and reliable source of quality supply and hence will open up new growth perspectives. For Tereos, this acquisition is a new step in our ambition of European development in anticipation of the end of the EU sugar regime in 2017."
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By GlobalDataNews of the agreement this morning came four weeks after Real Good Food said it was "examining options" for Napier Brown, which suffered amid the row with British Sugar last year. Real Good Food had accused British Sugar of using its dominant market position to impose "anti-competitive" sugar prices, although its concerns where dismissed by UK regulators.
Announcing the sale, Real Good Food did not refer directly to the affair but said Napier Brown needed to have "cost-effective sugars" available to it.
"The company believes that this requires the direct backing of a powerful producer and therefore Napier Brown has been exploring relationships with a number of sugar producers. It has become increasingly clear that such producers, while attracted to Napier Brown's UK route-to-market, desire full control of the business rather than a strategic partnership," Real Good Food said.
The company also pointed to the end of sugar production quotas in the EU in two years' time.
"The decision by the EU Commission to end beet production quotas in the EU from 2017 will have fundamental implications for the industry," Real Good Food said. "The directors believe that in the post-quotas era, Napier Brown's interests would be best served by having a direct integration with a sugar producer. Napier Brown has an important role in providing imports to the UK market, but in order to operate effectively, it needs to ensure high quality, cost effective and reliable sources of sugar."
