Kettle acquisition first step in larger food group?

By Gwen Ridler

- Last updated on GMT

A £50m price tag is a realistic figure Kettle Chips, claimed Wild
A £50m price tag is a realistic figure Kettle Chips, claimed Wild
The purchase of Kettle Foods’ UK and Ireland business by Valeo could be the first step in owner CapVest’s plans to create a larger food group that can float on the stock market, according to an industry expert.

The deal, which is understood to be worth more than £50m, would see the group acquire its first crisp manufacturer and would pave the way for a new snacking division for the Irish firm.

Julian Wild, corporate finance director at Rollits, said: “Valeo is backed by CapVest, which clearly has significant funds available and is looking to grow a large food group, presumably with a view to floating it at some stage.”

£50m ‘realistic’

Wild said the £50m price tag for Kettle was a realistic figure, considering the price PepsiCo paid for snack manufacturer Pipers late last year – £20m in November.

“Valeo apparently see Kettle as still being a premium brand – correctly in my view – with a strong reputation,”​ he explained. Despite this, Kettle faced stiff competition in the snacks market, especially from a wave of healthier snacks currying the public’s favour in the wake of the demonisation of ‘ultra-processed’ foods.

However, Valeo seemed to be invested in breaking into the premium snacks market through Kettle, despite a less-than-stellar result in its mid-year financial reports.

Turn Kettle around

“Kettle made a loss of over £4m on £51m turnover in the seven months to July 2018,”​ said Wild. “But it is a £90m turnover business with a good brand and Valeo obviously thinks it can turn it around.

Clive Black, senior analyst at Shore Capital, added: ​“While we cannot corroborate stories in the press, given the spread of Valeo’s activities – which include proprietary brands – it is not inconceivable that Kettle Foods, which has been subject to considerable ownership change, could be on their radar. Time will tell.”

It is unknown what plans Valeo has for the snack manufacturer after the purchase, but an acquisition would see at least 492 new employees taken under its wing – 411 production staff and 81 working in administration.

Valeo’s acquisition of Kettle would be the latest in a stream of food and drink business purchases by the company in recent years, adding to its growing stable of snack brands – including Jacobs and Kelkin. It purchased Tangerine Confectionery’s five UK factories and candy brands​ in August last year, eight months after its acquisition of Raisio’s confectionery business for £88.6m.

Campbell, Kettle Foods’ owner, was reportedly seeking a buyer for the business in May, two years after it acquired the businesses as part of the Snyder’s-Lance portfolio of brands.

Valeo owner Capvest declined to comment on the proposed deal.

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