April 7 - Finsbury Food Group plc, a leading manufacturer of premium and celebration cakes, low fat cake slices and artisan, organic and gluten free bread and morning goods, is pleased to announce today the acquisition of the trade and assets of Yorkshire Farm Bakery (“YFB”) and A & P Foods (“A & P”).
YFB is the one of the UK’s leading manufacturers of gluten free breads and morning goods, and is located on a freehold site in Hull. A & P Foods shares the same site, and produces gluten free pre-mixes for YFB as well as United Central Bakeries Ltd ("UCB"), which is part of the existing Finsbury Group. Both newly acquired businesses have been purchased from the Arnett family, three of whom will be remaining with the business.
The YFB business started trading in 1983 as a general wholesale bakery. In 2000, the business entered the gluten free market and has now developed into a dedicated gluten free site. A & P has been trading since 2005. The businesses employ over 100 people and primarily focus their sales upon the UK’s major multiple grocers, from where they derive over two thirds of total sales.
Combined YFB and A & P sales in the year ended March 2007 were £7.30m, with forecast sales for the year to March 2008 being no less than £8.50m. Pro forma EBITDA for the year to March 2007 was £0.70m, and for the year to March 2008 is not expected to be less than £ 1.40m. Acquired net assets are valued at £3.66m.
Finsbury has created a new trading company, Livwell Ltd, to complete the acquisition of the assets and undertaking of YFB and A & P for a total maximum debt-free consideration of £8.90m. £4.80m is payable on completion, with the remainder payable in stage payments. The final payment of £2.50m is due to be made in July 2010, with the balance over four broadly equal stage payments in six-monthly intervals from July 2008 to January 2010. The initial consideration will be funded by a commercial mortgage of £0.80m and a £4.00m term loan provided by the Group’s bankers, HSBC Bank plc, internal funding and an extended overdraft facility.
According to Mintel, the Free From market was worth £180m at retail prices in 2007 and is forecast to nearly double by 2012. Approximately one half of the Free From market is gluten free. Combined with UCB, the Group believes it has around 20% of this part of the market and is now the market leader in the bakery segment.
The acquisition complements the Group’s health sector – an area where it has already experienced strong growth and foresees further significant potential, as well as offering the greatest degree of protection from a downturn in the economy.
The Directors remain confident that the existing Group is on course to meet market expectations for the current year, and can confirm that the newly acquired businesses will be earnings enhancing during the Group’s first full year of ownership.
Commenting on the acquisitions, Dave Brooks, Finsbury Food Group plc’s Chief Executive, said:
"Finsbury Food Group is delighted to welcome the Arnett family and their businesses into the Group. Our trading relationship goes back to late 2005 when the Group acquired UCB, and we look forward to continuing our growth together. The UK retail market offers huge scope for growth as more and more consumers choose a wheat free diet, and the UK medical prescription market, which is twice the size of the retail market, brings new opportunity. There is also significant scope to develop a stronger export business as awareness grows in Europe. These businesses perfectly fit our acquisition criteria, and their acquisition is further evidence of our Group’s confidence in our market positioning and trading performance."
Commenting on their new partnership with Finsbury Food Group, Tony Arnett said:
"Over the last five years, our growth in the Free From market has been significant, and during 2007 the family came to the view that it was time for the business to be grown within a larger concern to ensure the potential we had created was fully developed. Our team in Hull have been fantastic work colleagues over those years and we now look forward to the next exciting phase of Livwell with Finsbury."