Finsbury Food Group has sold its free-from business to Genius Foods for £21M to focus on its core bread and cake business ̶ and reduce debt.
The free-from business consists of two subsidiaries: Hull-based Livwell bakery and West Lothian-based United Central Bakeries (UCB).
The subsidiaries, which account for 14% of Finsbury’s revenues, have been sold to Genius Foods on a debt-free, cash-free basis.
Finsbury will receive £17.7M on completion of the sale, and a further £3M is payable by the second anniversary.
‘Putting the best foot forward’
John Duffy, chief executive of Finsbury Food Group, said: "We believe that our decision to focus on our core cake and bread business is the group putting its best foot forward. The sale will allow the group to further invest, pay down debt, and take advantage of additional opportunities available to us, with the ultimate goal of driving shareholder value."
HSBC has provided a £7.5M funding package to facilitate the acquisition.
Edinburgh-based Genius Foods has a 50% share of the UK gluten-free bread market. The firm said this acquisition would further reinforce its market leading position.
UCB already produces some Genius products and this purchase is the next natural step in the evolution of the joint venture that has existed between the two businesses since January 2011, said Genius.
“The acquisition of these two bakeries will be transformational for Genius and will enable us to accelerate the development of the brand’s gluten-free range of bakery products,” said Roz Cuschieri, chief executive of Genius. “We intend to invest in the bakeries and the team that work there. Our intention is to invest to cope with the increasing demand for our products.”
Finsbury’s free-from companies achieved total sales of £28.5M for the year ended June 2012 and annual profit before tax of £600,000.
The annual profit before tax for the year ended June 2012, before allocation of group overhead costs would have been £1.4M.
The value of net assets of the free-from business is £6.1M as of December 2012.
Genius currently has a turnover of nearly £20M, and estimates a turnover in 2013 approaching £50M.
Meanwhile, Doug Baikie, interim chief executive, HSBC in Scotland, said: “Genius Foods is the perfect example of the type of business HSBC is well placed to support, and we’re delighted to be working with the team at Genius as the business embarks on a period of significant expansion.”