Vision Capital to sell Fletchers Group in £56m deal

YORKSHIRE’S Fletchers Group is to be snapped up by cake maker Finsbury Food in a deal which will create one of the largest speciality bakery groups in the UK.

The acquisition, for £56m, will create a group with sales approaching £300m.

Fletchers was bought by private equity firm Vision Capital in 2006. It paid £160m to buy a collection of businesses including Fletchers Bakeries. Earlier this year, Vision began looking for a buyer for Fletchers. 

The Sheffield-based business, founded in 1985, is a supplier of bakery and morning goods to the foodservice and retail markets. It recovered from a devastating fire in 2006 and now claims to be the UK’s top fresh and frozen bakery group. 

The acquisition by Cardiff-headquartered Finsbury, best known for making celebration cakes, will provide a platform for the group to address the UK foodservice bakery market, which is worth approximately £900m per year – 70% of which is morning goods and both Finsbury Food and Fletchers supply products to the growing morning goods sector.  
 
Stephen Holding, managing director of Fletchers, which incorporates three businesses – Fletchers, Kara and Grain D’Or – said: “Fletchers has undergone a significant transformation since it was acquired by Vision Capital in 2007, 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.”
 
John Duffy, chief executive of Finsbury Food, said: “The acquisition of Fletchers is a transformational development for the group, and will add scale to the effect that we will be one of the largest speciality bakery groups in the UK.
 
“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. We believe the enlarged group will 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. We look forward to welcoming the Fletchers team and customers into Finsbury Food and continuing to provide our newly broadened customer base with high quality products and service.” 

Since March 2014, Fletchers’ financial year has been strong, with sales in line with management expectations. Fletchers is seeing the benefits of substantial capital expenditure in recent years and has secured a number of significant contracts since the 29 March 2014 financial year-end which will benefit sales in the second half.

Fletchers supplies customers including Marks and Spencer, Sainsbury’s and Tesco.

The acquisition will be treated as a reverse takeover and, in order for it to proceed, will require shareholder approval and for the enlarged share capital of the company to be admitted to AIM.

The total consideration payable by the company for Fletchers is approximately £56million on a debt-free/cash-free basis. The consideration is to be funded through a significantly oversubscribed placing of new ordinary shares raising £35m at 59p and new debt facilities.

KPMG advised Vision Capital on the sale of the business.

James Murray, partner at KPMG, said: “Fletchers is the UK’s leading fresh and frozen bakery group, supplying the country’s largest retailers, and its acquisition is a transformational deal for Finsbury. In addition to its exposure to the retail market, Fletchers will also provide access to the attractive bakery foodservice market, which is currently worth around £900m per year.

“The deal is representative of the wave of consolidation we are seeing in the sector as businesses seek to expand scale, diversify their customer base and broaden their distribution channels; a trend which we certainly see continuing in the short to medium term.”