Irish-bakery McCambridge has re-emerged as the front runner to buy struggling cake manufacturer Inter Link Foods just one week after talks appeared to have collapsed.
Inter Link chairman Jeremy Hamer confirmed that discussions between the two groups were back on track and that an audit by McCambridge engineers at one of Inter Link's Blackburn facilities on Tuesday was part of the due diligence process.
"We are definitely making progress now with McCambridge carrying out its due diligence process," said Hamer. "McCambridge now has free access to everything but the most highly sensitive information."
McCambridge would not comment on the audit, but finance director Derek Ryan said it expected an outcome in a matter of weeks. "We've made no decision yet as we're still gathering information," he said. "Tuesday was our first visit to the site. Some things are good and some are not. But we expect to make a decision in the next couple of weeks." Inter Link chief executive Ian Croxford added: "I would expect an announcement around the middle of July."
However, the takeover was not a done deal, said Catalyst Corporate Finance analyst Simon Peacock. He said Inter Link was still in talks with eight other potential buyers interested in acquiring the business as a whole. The highly acquisitive Premier Foods and private equity group Vision Capital are thought to be among them.
Premier already has two strong cake brands in Mr Kipling and Lyons, and Soreen, Inter Link's best performer, would be an attractive prospect for the group, said Peacock.
Vision Capital sold Smiths Flour Mills to Longmynd Industries on 6 June for an undisclosed fee releasing capital for further investment. "Inter Link would want to cast the net wider among potential buyers rather than settle for the likely suspects from trade or private equity houses," said Peacock. "The trade guys might want to wait and see how the process spins out before an making an asset approach. Premier could be aggressive and put the money on the table for Soreen quite quickly.
"However Vision Capital is very comfortable with both own-label and branded products and has a good model for reshaping problem businesses and selling them on in five years or so."
Shares at Blackburn-based Inter Link Foods remain suspended at 106.5p, valuing it at £12m. It is struggling with £63m debt and has issued a chain of profit warnings this year.
Dublin-based McCambridge is a family-owned bakery that produces a range of luxury cakes but is better known for being Ireland's leading supplier of Irish Stoneground Wholewheat brown bread.