Weetabix's sale could just be the start

Buxton: ‘Weetabix could mark the start of a spending spree on UK assets’

Weetabix’s sale for £1.4bn ($1.76bn) to US firm Post Holdings by its owner Shanghai-based Bright Food, was the biggest UK food sector deal to emerge last month. 

It was matched only in significance by Unilever’s announcement that it planned to hive off its spreads business, including iconic brands such as Flora and Bertolli.

The sale of Weetabix by its Chinese owner was attributed in part to the failure of its plans to grow demand in China for breakfast cereals as much as it had hoped, given that nation’s preference for hot and savoury breakfasts.

Jonathan Buxton, partner and head of retail and consumer at Cavendish Corporate Finance, said of the acquisition: “Weetabix fits very nicely with Post Holdings, the third largest cereal company in the US.

“Post already has a presence in the UK via its iconic Grape-Nuts cereal brand, and its expertise in marketing and distributing a range of cereals make it a strong contender to be custodian of the various Weetabix brands.”

‘Spending spree on UK assets’

Buxton added: “Importantly, the [$1.76bn] takeover of Weetabix will give Post both a significant UK presence and a greater share of the North American market. Post has been highly acquisitive in the past and an acquisition of Weetabix could mark the start of a spending spree on UK assets, making the most of its dollar-denominated spending power.

“While its sales in China doubled in 2016, Weetabix was put up for sale in January this year after the Chinese state-backed Bright Food failed to expand Weetabix in its home [UK] market.”

Bright Food acquired a controlling 60% stake in Weetabix in 2012 for £1.2bn. The Financial Times reported that Weetabix’s sales in the most recent financial year had been £410M, down from £425M the previous year.

It added that Rob Vitale, Post Holdings’ chief executive, was looking for £20M a year in cost savings through procurement ‘synergies’ rather than redundancies at Weetabix.

Credit ratings agency Moody’s added that the bulk of Weetabix’s £410M revenue in 2016 came from the UK, while 19% came from sales in the US, 4% from Europe and 4% from other global markets, including China and Africa.

Invest £30M to expand

The announcement of the Weetabix sale followed news in January that it planned to invest £30M to expand its operations at Burton Latimer and Corby in Northamptonshire.

Under the deal with Post Holdings, Weetabix’s chief executive Giles Turrell would become Weetabix’s first chairman.

Meanwhile, Unilever’s statement that it was considering selling off its spreads business followed a structural review of the business instigated by the group’s boss Paul Polman after Kraft Heinz’s retreat from its £115bn ($143bn) takeover bid for the Anglo-Dutch conglomerate, announced in March.

It has since emerged that it might break up its spreads business to maximise the price in an auction sale.

This raised concerns by the Unite union about the future of the 200 jobs at Unilever’s spreads factory at Purfleet in Essex. Unite also sought assurances that the jobs of the 110 workers it represented at Weetabix’s UK sites would be safe.

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