Weetabix, the UK’s second biggest cereal brand, is being circled by rivals as its owners look to offload it, having struggled to crack the Chinese market.
Cheerios maker Nestle and Lucky Charms owner General Mills are understood to have expressed an interest through their existing Cereal Partners Worldwide joint venture.
Quaker Oats owner PepsiCo is also understood to be involved in the process, as is Turkish group Pladis, which bought Jaffa Cakes maker United Biscuits in 2014 for £2bn.
Bankers say that it is unlikely that Kellogg’s, the world’s biggest cereal maker, would be able to overcome the competition concerns surrounding a deal and as a result will opt out of the bidding war. China’s Bright Foods has already hired Goldman Sachs to sell the 84-year-old brand.
Bright Foods bought a 60pc stake five years ago in a deal that valued the cereal maker at £1.2bn. Private equity firm Lion Capital then subsequently sold its remaining stake, after a decade of ownership, to Baring Private Equity Asia in 2015 for an unknown amount.
Weetabix is the seventh biggest cereal brand globally but only controls around 1.3pc of the market, compared to Kellogg’s 22.5pc share. It is thought that Bright Foods is looking for around £1.5bn, but City sources have said that bidders may be unconvinced to pay that much given that Weetabix’s revenues of £346m in 2015 are 2pc lower than at the time of the 2012 deal. Pre-tax profits have also dipped by 1pc.
One source described the cereal brand as “nice to have, not need to have”. He added that “Lion Capital had held it for 10 years and hadn’t been inundated with offers during that time, so why now?”
Weetabix doubled its sales in China in 2016, according to the company, but the UK still accounts for 84pc of its market.
Bright Foods and Baring Private Equity Asia declined to comment.
By Ashley Armstrong
Source: Telegraph
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