Blackstone, PAI Start United Biscuits Snacks Sale - Source
09/19/2012| 10:28am US/Eastern
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By Jessica Hodgson
LONDON--United Biscuits has fired the starting gun on the sale of its salty snacks business, a person familiar with the matter said Wednesday, as the U.K. food group tries for the second time in two years to sell itself.
The Hayes, England-based maker of Hula Hoops and Twiglets, owned by private equity groups Blackstone Group (>> The Blackstone Group L.P.) and PAI Partners, has sent sale memoranda out to a number of potential buyers, the person said. Although the person didn't identify the recipients, they are likely to include many European consumer-focused private equity groups, U.S. food groups including Kellogg Co. (K) and Kraft Foods Inc. (>> Kraft Foods Inc) and possibly some Chinese food groups. Credit Suisse (>> Credit Suisse Group AG) is running the sale.
However, although the sale memoranda are expected to be widely distributed, bankers and private equity sources say interest in the asset from buyout specialists currently appears muted.
Blackstone, PAI, United Biscuits didn't respond to requests for comment. Credit Suisse didn't respond to a request for comment.
The valuation United Biscuits seeks for the unit is unclear. United Biscuits overall posted earnings before interest, taxes, depreciation and amortization of GBP230.8 million ($360.9 million) on revenue of GBP1.3 billion for 2010, according to its last reported annual earnings. Press reports suggest the snacks business is worth around GBP500 million.
Credit Suisse earlier this year completed a process of splitting United Biscuits into two parts, the salty snacks business and a larger rump business that houses brands including Jaffa Cakes and Jacob's biscuits, a prelude to the salty snacks sale. Its unclear what United Biscuits plans to do with the rump biscuits business.
Splitting the group was a reaction to an earlier, failed sale process run by Goldman Sachs Group Inc. (>> Goldman Sachs Group, Inc.) and JPMorgan Chase & Co. (>> JPMorgan Chase & Co.) almost two years ago.
European food groups are increasingly seeking to reach out to China's fast-growing corporations who in turn are looking to diversify beyond mainland China where economic growth is slowing and costs are rising. A number of Chinese firms have bought or looked at buying food and consumer goods companies in Europe in recent years.
Press attention has focused in particular on food and beverage giant Hangzou Wahaha Group, owned by China's richest man, Zong Qinghou, as a potential suitor for United Biscuits. Kelly Zong, head of international business at Wahaha and the daughter of Zong Qinghou, said in a recent interview the company is working with investment banks to identify international opportunities.
One U.K.-based banking source said Wahaha had been "front-run" -- or given an early opportunity to look at United Biscuits before the formal sale process begun, in an indication of the increasingly important role Chinese groups are seen playing in European M&A.
A spokesman for Wahaha declined to comment.
Wahaha is following the lead set by Bright Food Group Co., which acquired a majority stake in U.K. cereal maker Weetabix in May. Bright Food, which makes China's White Rabbit candy, had previously looked at a number of western food and consumer goods businesses -- including United Biscuits during the previous auction.
Last year, Bright Food lost out to General Mills Inc. (>> General Mills, Inc.) in a bid for a 50% stake in French yogurt, and also looked at U.S. vitamin maker GNC.
The salty snacks market in China is forecast by Mintel to grow at about 9% on a compound annual growth basis over the next five years. But Mintel notes that the market is highly fragmented, making it difficult for brands to stand out.
-Write to jessica.hodgson@dowjones.com
(Marietta Cauchi in London and Laurie Burkitt in Beijing contributed to this article)
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