Weetabix look at possible deal with Chinese food company

In a possible deal that could make the private equity owners of Weetabix worth 1 billion pounds, Lion Capital is looking into a deal with Chinese state-backed company, Bright Food. The makers of the famous British breakfast cereal, as well as Ready Brek and Alpen, have been talking with the company, based in Shanghai, for a few weeks now.

It is uncertain at what stage the talks are or if they will reach a successful conclusion but it is a known fact that Lion Capital will only sell the business for a high price. The recent talks started after Lion Capital re-financed their debt of £900 million, at the end of last year. Thanks to several dividend payouts, they have already trebled their initial investment from when they bought the brand eight years ago.

With a yearly turnover of more than £4 billion, Bright Food is one of the largest food groups in China. Their takeover success rate is not that good, however. Two years ago, talks broke down between them and United Biscuits when they attempted to buy the British makers of Jaffa Cakes.

Two years ago, Bright Food made an attempt to buy the sugar and biofuels section of CSR, Sucrogen. The talks again broke down with the Australian company. Then last year, when trying to buy a stake in Yoplait, the French yoghurt producers, they were beaten to the post by General Mills. They had one success last year, though, when they managed to attain 75% of the Australian company, Manassen foods.

The Weetabix brand is responsible for 7% of the UK’s cereal sales and is the second largest producer of branded cereals and cereal bars in the country. Based in Kettering, Northants., they manufacture 70 million Weetabix biscuits every week.

They export to over eighty countries worldwide and also have operations in Germany, Spain, the US and South Africa. Their pre-tax profits were £ 20.4 million in 2010 a rise from £4.3 million the previous year. They have a workforce of two thousand people in the United Kingdom.