Kraft takes £575m bite of United Biscuits

US food group Kraft has bought the southern European division of United Biscuits, five months after Goldman Sachs was appointed to carry out a strategic review of the biscuit and snacks manufacturer.

Kraft Foods, a US food group, has paid £575 million (€829 million) for the southern European business of United Biscuits, majority owned by buyout firms Cinven, PAI Partners and MidOcean Partners. The deal leaves the private equity firms open to sell the remaining units of the manufacturer of branded biscuits and snacks.
 
Goldman Sachs was appointed in February to carry out a strategic review of United Biscuits. In May, Kraft partnered with Premier Foods and Dutch private equity firm NPM Partners to buy the whole of United Biscuits but the deal broke down as the parties failed to agree terms.
 
Through its stake in United Biscuits, Kraft was able to match competing offers from other bidders through pre-emption rights. Once the Kraft sale is completed, a new process to sell the northern European division is expected to take place.
 
Interested buyers are believed to include Premier Foods and Danone, as well as Lion Capital, a UK private equity firm which spun out of Hicks Muse Tate & Furst, now HM Capital Partners, last year.
 
United Biscuit’s southern European business is the largest biscuit manufacturer in Spain and Portugal, with approximately 26 percent and 37 percent market share respectively. As part of the transaction, Kraft has acquired the rights to all Nabisco trademarks, including Oreo and Ritz, in the European Union, Eastern Europe, the Middle East and Africa.
 
Cinven, PAI Partners and MidOcean Partners acquired a majority stake in United Biscuits in a €2.9 billion public-to-private in April 2000. Kraft Foods bought a minority stake in the same transaction, reported to be approximately 25 percent.
 
In 2004, United Biscuits strengthened its portfolio with the acquisitions of Jacob’s Biscuits in the UK and Triuno in Portugal.
 
Malcolm Ritchie, chief executive, United Biscuits, said in a statement: “Kraft is the natural buyer for our Southern European business, as it sells a number of brands like Oreo under license from Kraft. The rest of our business, representing approximately 82 percent of group turnover, which is based in the UK and Northern Europe, remains unchanged and we are focused on maximising our significant presence in both these markets. We reported a strong start for the first quarter of 2006 and we continue to see  opportunitiies to further develop our key brands in all sectors, including healthy and indulgent.”
 
Last month, United Biscuits reported first quarter revenue increases in the UK of 8.3 percent to £234.1 million, while its northern European activities saw revenues grow to £48.8 million, an increase of 3 percent on the same period in 2005.