Premier Foods has made no secret of its desire to pull off a double whammy of acquisitions. Many assumed that it would snap up United Biscuits' UK operations first thanks to chief executive Robert Schofield's former association with the business and last week's news that Kraft is to buy UB's Southern European arm for £575m.

That it has completed the Campbell's deal instead suggests that there are still some key details to be thrashed out with UBUK: for starters, whether Premier will have to take it as a job lot.

But that doesn't mean that a deal isn't on the cards - and all the signs seem to be pointing to one as soon as the ink has dried on the Campbell's deal.

If a bid is tabled, it will mark the culmination of a road with many twists and turns. When the deal was first mooted in May, Premier was said to be considering joining a Kraft-led consortium bid to break up the UB business. A Dutch private equity investor, NPM Partners, was also involved. That alliance fell apart, however, after they failed to agree terms.

Now, significantly, Kraft has surrendered its pre-emptive rights to match any rival bid for the UK business, paving the way for Premier to make a solo bid. Speculation that one is imminent has been further fuelled by Premier's decision to over-fund the Campbell's deal with a £460m rights issue. It has also extended its debt facility by £300m.

Andrew Saunders, analyst at Numis Securities, says: "They have clearly over-funded the deal with the rights issue. The explanation was that they wouldn't have to return to the market for funding."

The question now is: would Premier bid for all or just part of the business. Saunders believes that it would be primarily interested in the McVitie's stable, but might have to take it as part of a job lot. Other analysts see upsides in a number of the UB brands, especially in light of recent NPD activity. This has underpinned impressive sales growth of 9.7% among its core biscuit brands in the first quarter of the year and 4.1% in its core snack brands.

There are a number of potential sticking points, however, according to analysts, not least the price at which UBUK might be prepared to sell. It is expected to command a price tag of £1.5bn. But some analysts have suggested this may be a bit rich for Premier's blood given its own turnover of nearly £800m .

In an interview with The Grocer last week, Schofield himself made it clear that he was not prepared to pay over the odds for anything. The good news as far as he is concerned is that not many other players have been actively linked with a bid. RHM is understood to have requested information from UB. If it does table a bid, Premier will be hoping that any bidding war is restricted to trade players, keeping the price down.

UB may yet consider a float, but that would depend upon the level of interest in the City.

In an interview with The Grocer before the Kraft deal, UBUK's MD Benoit Testard insisted that it was very much business as usual at its UK HQ in Hayes: "Premier is a question for the shareholders. My role is to deliver the best results."

He has certainly been doing his best to make UBUK an attractive proposition for a potential buyer. UB has launched 34 new products this year in all, double the number it launched last year. Testard has also been busy rationalising the business's portfolio.

"We've got too many SKUs on the shelf," he admits. "We need more visibility. Simplification is the best way to grow.

"We've got more than 20 brands and we are ­actively positioning them and ­improving the core in order to ­accelerate innovation. The goal is to bring the right new product development to market."

That does not necessarily mean that he plans to significantly reduce UB's 1,600 SKUs. However, he says: "When I talk about rationalisation, it is more about the market generally. I'm asking retailers to evaluate the range and get rid of SKUs that don't deliver what they should deliver. It is other brands, but it might also be our brands."

He has been focusing innovation on three key areas: indulgence, convenience and health. "We've focused on really responding to consumer expectations."

UB's rationalisation programme has introduced some much needed clarity, believes Testard.

Whether he's in charge or not, he believes there is massive scope to grow the business. "We have about 25% of the biscuit market. I'd hope to reach 40% in the next three to four years and substantially increase our snacks business - at the moment, we only have a 15% share: it's very little."nUBUK: the facts

First quarter revenue increased by 8.3% to £234.1m on the same period in 2005, according to its latest trading update last month.

Profits were up 21.5% to £26m on the first quarter of 2005.

Core brands continued to demonstrate strong growth, with core biscuit brand sales up 9.7% and core snack brands up 4.1%.

Growth was driven by strong innovation including new Go ahead! products, McCoy's Specials Tortillas, McVitie's Moments, McVitie's Jaffa Cakes flavour varieties and Hula Hoops ridges.

The acquisition of the Jacob's business, acquired in September 2004, was completed in the first quarter of 2006.

Other brands in the stable include McVitie's, Penguin, Go ahead!, McVitie's Jaffa Cakes, Jacob's, Twiglets, Hula Hoops, Skips, Mini Cheddars, McCoy's, Phileas Fogg and KP Nuts

UBUK acquired Golden Wonder brands, Nik Naks and Wheat Crunchies, in February

Branded products accounted for almost 90% of sales in 2005 and were purchased by over 85% of UK households

Topics