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Kraft and Premier Foods eye United Biscuits

By Anita Awbi , 10-May-2006

US food giant Kraft is partnering with Britain's Premier Foods to launch a bid for United Biscuits, according to industry insiders.

Reports in the British press suggest the pan-Atlantic pair, together with a Dutch private equity firm, are set to offer around £2.3bn for privately-owned UB.

Kraft Foods, maker of Dairy Lea cheese and Ritz crackers, currently holds a 25 per cent share of the biscuit firm. Reports suggest it is now interested in upping its stake to include UB's Southern European operations, which already manufactures Kraft's flagship Oreo brand under licence.

 

Premier Foods confirmed in the Financial Times newspaper last week it is also in acquisition mode, but would not reveal target brands or areas. Its wish-list is thought to include UB's top-selling British brands Jaffa Cakes and McVitie's.

 

The firm, famous for Branston pickle and Hartley's jam, told the newspaper it is "in the preliminary stage of evaluating a number of opportunities which could potentially meet its acquisition criteria for value creation."

 

Sources close to the deal have reported that all companies are in very early stages of negotiation, and an official announcement is not expected for some time.

 

UB, currently Britain's leading biscuit manufacturer, last month announced a year-end profit jump to £204m - up from 2004's £163m. This was bolstered by contributions from newly-acquired snack brands Jacobs and Truinfo. It has also recently purchased Nik Naks and Wheat Crunchies from bankrupt Golden Wonder.

 

Meanwhile Premier Foods has had a strategic year, acquiring Bird's desserts from Kraft, Quorn meat-free range from Marlow Foods, Gedney's fresh vegetable supplier and Cauldron's vegetarian range.

 

Overall, Premier Foods reported an annual group turnover of £789.7m, up six per cent from 2004's £744.7m - making it Britain's fourth largest food producer.

 

However the going has been tougher for global player Kraft. In February the firm announced a massive extension to its existing three-year restructuring plan, to get rid of 8,000 jobs and 20 production plants.

 

The manufacturer said the restructuring drive will be led by a "fewer, bigger, better" policy, concentrating on crucial brands in key areas as the firm suffers from lagging performance.

 

CEO Roger Deromedi said the company intends to focus innovation efforts on areas that yield higher revenue-per-pound, such as wellness, value-added and on-the-move products.

 

The firm will spend much of 2006 working on the efficiency drive, and claims the financial outlook is stable. But future performance rests on whether Kraft can effectively refocus its portfolio and successfully build presence in key market areas.

 

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