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Vion management buyout ‘most likely’ scenario: City analysts

By Lorraine Mullaney , 03-Dec-2012
Last updated on 05-Dec-2012 at 13:41 GMT

A management buy-out is the 'most likely' outcome, after Vion decided to sell its UK food businesses
A management buy-out is the 'most likely' outcome, after Vion decided to sell its UK food businesses

A management buyout is the “most likely” result of Vion’s dramatic exit from the UK’s meat processing market, according to City analysts.

Investec Securities analyst Nicola Mallard told FoodManufacture.co.uk: “A management buyout is the most likely scenario.” 

Shore Capital said Vion had already started talks with a number of interested parties before announcing its plans to sell its UK food businesses last month (November 19) to concentrate on “core markets” in the Netherlands and Germany.

The group employs 13,000 people at 38 sites across the UK. 

Clive Black told FoodManufacture.co.uk: “Vion’s exit from the UK is dramatic and likely to reverberate across the meat trade, the supermarket trading desks and the broader industry. The announcement of the exit also indicated that talks had already commenced with a number of parties, which we took to imply management.”

‘A number of interested buyers’

A spokesman for Vion told FoodManufacture.co.uk: “The position is that talks are continuing with a number of interested buyers but we cannot reveal any further details at this stage.”

Julian Wild, food group director at legal firm Rollits, said management’s most likely backer would be one of the turnaround private equity funders as they “take the good with the bad”.

He told FoodManufacture.co.uk: “The pork side of the business has a lot of assets, which a turnaround private equity funder would find appealing. Some of the sites have development potential.

“But the pork side of the business has been underperforming so anybody taking on this aspect of the company should think very hard about it.”

Wild warned that many turnaround private equity investors lacked the deep understanding of the food industry that was required to make a successful acquisition.

“The best-case scenario is for the business to end up in the hands of an investor who understands the food business. Private equity firms don’t always have the greatest understanding of the food industry.”

‘Asda and Morrisons might get involved’

Wild speculated that major retailers such as Asda and Morrisons might get involved – particularly the latter, as it has already entered the manufacturing business.

Black said: “In offloading nearly 40 units we would not be surprised to see a basket of outcomes; management buying business units, some potential further rationalisation and maybe disposals to competitors; time will tell.”

Wild predicted that Vion would offload the business in “big chunks rather than small bits”.

He said: “Any party wanting to cherry-pick the best parts of the company would be less appealing to Vion.”

A 'serious shrinkage' of Vion’s workforce

Whichever type of investor acquires the sites, a “serious shrinkage” of Vion’s workforce was “inevitable”, according to Wild.

“Some of Vion’s businesses are seriously underperforming and underinvested , so any investor would have to question their viability going forward.”

He said Hall’s of Broxburn was likely to be the first site to close as it was “unsalable”.

The Scottish Division of the union of shop, distributive and allied workers said it was still hoping that Vion would find a buyer for the Hall’s site.

Divisional officer Lawrence Wason told FoodManufacture.co.uk: “There are no opportunities in the area for work in a similar kind of industry so it would be very difficult to secure long-term employment for workers who have lost their jobs. This is very bad news for employees in the area.”

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