Finsbury cake production

Finsbury Food Group is buying Fletchers Group

Finsbury Food Group has acquired morning goods and specialist bread supplier Fletchers Group for £56m.

The deal will almost double Finsbury’s total sales – £175m in the last financial year – to around £300m, and the company said it would make it one of the largest speciality bakers in the UK.

Finsbury added it would also give access to new foodservice channels, helping to diversify its customer base, and allow it to benefit from significant capital investment in Fletchers manufacturing facilities over recent years. Fletchers is currently owned by private equity firm Vision Capital, which acquired the business in 2007.

The deal is to be funded through a “significantly oversubscribed” placing of new shares, raising £35m. Finsbury said it expected the acquisition to be earnings-enhancing during its first full year of ownership.

“The acquisition of Fletchers is a transformational development for Finsbury and will add scale to the effect that we will be one of the largest speciality bakery groups in the UK,” said Finsbury CEO John Duffy. “Fletchers is a highly complementary business, which broadens the Finsbury UK speciality bakery product, customer and channel growth potential, and will provide a strong platform for the group to address the foodservice markets.”

Licensing is a key element of the Finsbury business, and Duffy added the enlarged business would be in a strong position for new licensing arrangements, joint ventures and stronger customer and brand relationships.

“By servicing both the cake and bakery market, through both retail and foodservice, the enlarged group will have a diversified product and customer offering, and greater potential for driving growth for our shareholders.”

Fletchers MD Stephen Holding added: “Fletchers has undergone a significant transformation since it was acquired by Vision Capital, and I am very proud of the hard work and dedication of our colleagues which has made the company what it is today. This is an exciting next step for the company and I’m looking forward to the opportunities that being part of the enlarged Finsbury Foods will bring.”

Due to the size of the acquisition it will be treated as a reverse takeover and will require shareholder approval in order for the enlarged share capital to be admitted to AIM. Details of the enlarged business and notice of a general meeting is being posted to shareholders today.

Brokers Cenkos described the deal as a “step-change” for Finsbury. “This effectively doubles the size of the business giving access to the attractive foodservice market and broadening Finsbury’s grocery customer base,” it said. “Management has done an excellent job in recapitalising the business and we are encouraged that it is now looking to press on and lead consolidation in the sector with a sizeable transaction.”

Speaking to The Grocer last month, Duffey had said only businesses willing to invest would flourish in the challenging baked goods market. “There will be an element of organic expansion but growth will primarily be realised through acquisition and mergers which will help us diversify our products and customer bases,” he said at the time.