Oaktree scoops up ice cream maker Richmond
In a sign of the continuing problems plaguing the frozen food sector, Richmond Foods, the UK’s largest ice cream manufacturer, is being taken over by a investment capital company, which owns German ice cream manufacturer Roncadin, in a deal valued at around £180M.
Ice Cream Co, owned by Oaktree Capital Management, has set up a subsidiary called Ruby Acquisitions to oversee the acquisition. The deal, which has been recommended by Richmond’s independent directors, is subject to shareholder approval following an extraordinary general meeting in June. Once completed, Oaktree plans to combine Richmond with its Roncadin business.
It is not known whether Oaktree will consolidate any of Richmond’s UK plants with those of Roncadin should the deal proceed, but one source close to the deal said it was likely.
In October 2005, Oaktree acquired Roncadin, which Richmond had also earlier identified as a potential target as part of its plans to expand into continental Europe, but had not proceeded with the acquisition.
Over the last 10 years Richmond has led the consolidation of the UK ice cream manufacturing sector, including the acquisition of five businesses in the last six years. Richmond has increased its turnover and profit before tax from £88.5M and £4.7M respectively in 2000 to £140.7M and £14.4M last year.
However, tough trading conditions have seen the UK ice cream market decline by 0.9% in value over the year to September 2005. During the same period, the own-label share of the UK ice cream market, in which Richmond predominates, declined from 36.9% to 34.9%. At the same time, pressure on retail space within the frozen food category has continued and there remains price deflation in the family tub market, one of Richmond's more important categories.
Richmond’s chairman Ross Warburton said: “We believe that the proposals represent good value for the business and its prospects and, after careful consideration, the independent directors are unanimous in recommending shareholders to vote in favour of the proposals. “
In addition to being the largest manufacturer of own-label ice cream in the UK (74.3% by value of its turnover), Richmond also has the exclusive right to use the Nestlé Brands - including Skinny Cow, Smarties, Yorkie, Fab and Rowntrees Fruit Pastil-lolly - for ice cream products in the UK and Ireland.
Richmond, which primarily supplies the major retailers, has integrated the businesses it has acquired and invested £50M in manufacturing capacity and technology over the last five years. It has 28 production lines and manufacturing facilities in Wigan, Leeming Bar and Leeds and employs approximately 850 people.
