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December 5, 2012

UPDATE: UK: McCambridge eyes possible return to own-label

UK baked goods company McCambridge has said it will not rule out returning to private label after selling its own-label cake division to private-equity firm NBGI as part of a management buy-in deal.

UK baked goods company McCambridge has said it will not rule out returning to private label after selling its own-label cake division to private-equity firm NBGI as part of a management buy-in deal.

The company this morning (5 December) announced the sale of the business that operates bakeries in Manchester, Bradford, Blackburn, Salisbury and Szczecin in Poland, and produces a range of cakes and pies for leading retailers. NBGI confirmed the deal was made for GBP23.5m (US$37.7m).

McCambridge managing director Richard Cooper, who will leave the firm to “pursue other projects” following a transitional period, told just-food the company would consider entering private label again. 

“There is nothing at a group level that wouldn’t be considered and a large part of the trading environment today is all about private label as much as it is about brands. It would be very naïve not to look at a balanced portfolio and a balanced investment portfolio and private label absolutely sits up there and a number of retail strategies are driven on that.”

Cooper said McCambridge had built its own label cake business up as part of a “large turnaround process” over the last three years after purchasing it as Inter Link Foods, which went into administration in 2007. This, he suggested, made the unit an attractive purchase.

“We believe that we’ve got the business to a great place, the assets are well invested, customer feedback is consistently high and the quality of the output in terms of private label that we’re doing is, in our opinion, significantly above… the market in terms of competitive set.”

Cooper said the sale of the business, despite it having “great growth potential”, was more about “timing”.

“Someone offered us an opportunity to realise investment back and like most businesses today, there is debt and borrowing that needs to be balanced,” he told just-food.

“There’s a reason for realising the asset value of the business and the funds from that will go into supporting the group’s facilities as they currently stand as well as being reinvested back in the organisation.”

He added that a need for more consolidation in the industry was another factor leading to the decision to sell the business.

“If you talk to most retailers, most would say there is probably consolidation that is required in the sector and therefore, on that basis, from our point of view it’s a good investment and it’s an appropriate time for us to exit.”

He declined to reveal who the interested parties were, but said there was “significant” private equity investment interest as well as trade interest in the unit.

Cooper said McCambridge will now focus on its two remaining businesses: Soreen malt loaves and fruit loaf products; and its bakery business in Ireland.

“We’ve got two significant branded businesses left in the portfolio. They have good growth today and have good growth potential going forward and it will allow the group to refocus their attention on those businesses.”

Investment in the two remaining businesses may come from the proceeds of the sale, which Cooper suggested may also be used to pay down debt.

Cooper declined to comment on whether McCambridge would look at merger and acquisition opportunities.

For now, Cooper said his task will be to ensure a smooth transition period while Andrew Johnson takes over as the new chief executive.

Johnson will join the company with “extensive experience” in growing businesses supplying private-label foods into supermarket multiples in the UK, NBGI said. He was previously chief executive for a buy-in into Elisabeth the Chef in 2004, a private equity-backed supplier of chilled private label cakes to UK supermarkets, for three years.

Richard Babington, investor director of NBGI said the private-equity firm is backing Johnson in his second MBI into the food sector following “a long search”.

It is not known how long the transition period will take, but Cooper told just-food he will leave the business once complete and potentially “go on and do more disposals in the private-equity world or in the trading world”.

“You have to keep your options open,” he said.

NBGI said in a statement that post completion, the business will be renamed and will likely act as a “platform to grow into the pre-eminent supplier of private label and branded cakes to the UK retail and foodservice sectors”. 

NGBI’s previous management buy-ins in the food sector have included: Pasta King, Peters Food Service, Tasties of Chester and Brambles Foods.

All employees are expected to transfer across to NBGI once the transaction is complete, with no change to their terms and conditions. “At this stage there is no right-sizing or downsizing that has been talked about in the business,” Cooper added.

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