Brakes Group plans to dramatically ramp up its presence in Continental Europe by acquiring Davigel, a France-based frozen and chilled arm of Nestlé.
News broke on Wednesday that Brakes is in exclusive talks with Nestlé about acquiring Davigel - a deal that Brakes CEO Ken McMeikan said would, in effect, double its business in France and open up the Spanish and Belgian markets.
Ice cream and frozen desserts supplier Davigel is a €650m (£468m) business with 3,000 employees and is “fantastically complementary” to Brakes’ own long-established business in France, McMeikan said.
“The French market is much less consolidated than in the UK, and there are a large number of smaller foodservice operators,” he said. ”In effect, instead of having one player we will have two, both with very strong brands, and we gain significantly in terms of scale, purchasing benefit and added manufacturing capacity.”
Davigel will continue to be run as a separate brand, but Brakes hopes its increase in scale will create purchasing efficiencies.
McMeikan said the deal, purported to be worth about €300m, should close by the end of summer subject to clearance from competition authorities and Brakes winning out over other suitors.
Davigel has a relatively small presence in Spain and Belgium, but “it is well established in these markets and offers us an opportunity to widen the net beyond the four markets in which Brakes currently operates.”
The Davigel sale is part of Nestlé’s ongoing brand portfolio review. The Swiss food giant said it was “exploring strategic options” for Davigel in mid November.
McMeikan would not be drawn on financial terms but insisted the group “can afford it” and the deal fitted with its plans to reduce operational gearing. Brakes is targeting a debt/EBITDA ratio of 5x, having already brought the ratio down from 7.2x in 2012 to 6.5x in its 2014 annual results.
Separately, UK competition authorities have cleared Brakes’ merger with Fresh Direct.