Colin the Caterpillar

Park Cakes has worked with M&S since the 1940s and makes the retailer’s Colin the Caterpillar range

Own-label cake supplier Park Cakes has drafted in City advisers to explore a potential sale.

The group, which makes the Colin the Caterpillar cake for Marks & Spencer, is working with advisory firms Teneo and A&M to explore its strategic options, The Grocer has learned.

Park Cakes employs more than 1,700 staff across two bakeries in Greater Manchester. It supplies a wide range of cakes and desserts to M&S, Tesco, Sainsbury’s, Morrisons and discounters Aldi and Lidl, as well as Coles in Australia and Loblaws in Canada.

The business is owned by its management team, who completed an MBO in 2017 to provide an exit to Vision Capital.

A City source told The Grocer the business had worked hard to get trading on track following challenges throughout the pandemic, but needed fresh funding.

Listed bakery group Finsbury Food, private equity-backed own-label cake maker BBF and Baker & Baker, a UK-based bakery group, are understood to be potential buyers for Park.

However, the CMA would be a concern for any deal, the source added.

Park’s revenues increased 16% to £164.7m in the year ended 26 March 2022 as it recovered strongly from a pandemic slump, according to accounts filed at Companies House earlier this month.

The company had slumped to a £3m pre-tax loss the previous year as the closure of M&S stores in the first Covid lockdown contributed to a 12% fall in sales to £142m. However, it has since boosted sales with a range expansion and negotiated price rises to offset rising input costs.

As a result, EBITDA increased 14% to £6.3m in 2021/22 and pre-tax losses reduced to £1.3m.

The new accounts also revealed Park had restructured its banking facilities with Yorkshire Bank to help reduce interest payments.

“The business continues to be resilient in these turbulent times, and the group has had to react quickly and effectively to maintain growth and profitability,” finance director Paul Morton said in the accounts.

“The group is well protected to weather the impact of any further inflationary headwinds and is expected to drive incremental sales growth through NPD and opportunities with new customers in the pipeline.”

Park was one of four businesses acquired by Vision Capital in 2007 from Northern Foods in a deal worth £160m.

The business launched in Oldham in 1937 as McDowell Cakes before changing its name to Park Cake Bakeries in 1948 and winning its first order from M&S, which remains its biggest customer today.

Teneo and A&M declined to comment, and Park Cakes could not be reached for comment.