United Biscuits agrees to €2.4bn takeover

McVitie’s and Jacob’s owner United Biscuits agreed today to a £1.6bn (€2.4bn) takeover by a consortium made up of two private equity firms.

The British company, which was founded in 1948 and employs 7,500 people in the UK, is set to be bought by European firm PAI and United States-based Blackstone Group.

PAI already holds a stake in UB and is poised to become a 50% shareholder, with Blackstone taking on the other half as part of the deal.

UB investors Cinven and MidOcean Partners – which along with PAI invested £402m (€599m) in UB in 2001 – will no longer have any involvement.

UB chief executive Malcolm Ritchie said: “Blackstone has a successful track record of owning and developing companies such as UB and I believe the company will benefit from their involvement. I am delighted PAI has decided to remain a shareholder and participate in the next phase of the company’s development.”

UB runs operations across the UK, including Jacob’s factories in Aintree and Leicester, KP plants in Rotherham and Ashby de la Zouch, as well as McVitie’s sites in Carlisle and Manchester.

It makes a range of products, including Penguin, Hula Hoops, Mini Cheddars, McCoy’s, Phileas Fogg and KP Nuts.

In July, US food giant Kraft paid £575m (€857m) to acquire the southern European arm of the business, which covers Spain and Portugal.

Today’s deal, which will be financed through an equal combination of equity from both partners and should be completed in December, is now subject to clearance by the European Commission and UK Pensions Regulator.

UB and PAI both said it would be business as usual for the company’s workers, although Blackstone declined to comment in detail on the agreement.

However, the Transport and General Workers’ Union (T&G) called for action to fund UB’s £213m (€317m) pension deficit now the food firm has been taken over.

Brian Revell, T&G national organiser for food and agriculture, said: “Private equity deals are invariably struck for quick returns for shareholders.

“But the T&G’s view is that the workforce and their pensions must be taken into account. That’s why we believe there should be a cash injection to show this is not a quick-fix deal, but a longer-term investment.”

A UB spokesman said: “UB has already taken steps to manage its pension liability and has worked closely and effectively with the trustees to reduce service costs and manage the deficit.

“We are committed to providing reasonable pension benefits to our employees and this commitment remains in place.

“As part of the agreement with our new shareholders, a significant lump sum payment will be made to the pension plan and a commitment to an accelerated programme of contributions to cover the remaining deficit has been agreed.”

UB was founded in 1948 following the merger of two Scottish family businesses - McVitie & Price and MacFarlane Lang. In 1960 UB added to its portfolio with the acquisition of Crawford’s Biscuits and MacDonald’s Biscuits.

In September 2004 it bought the Jacob’s Biscuit Group from Danone and in February this year the company signed a deal to gain control of the Nik Naks and Wheat Crunchies brands from Golden Wonder owner Tayto.

Hours before news of the takeover broke today, UB said it was poised to shift production of Nik Naks and Wheat Crunchies from the Golden Wonder factory in Scunthorpe to its own sites.

Tayto has been making the snacks under contract, but UB wants to move Nik Naks production to Ashby de la Zouch and Wheat Crunchies to Teesside.

Tayto stressed today that it did not expect any job losses among the 395 staff in Scunthorpe because other crisps will still be produced at the site.