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Pledge to farmers as Cranswick buys rival Bowes
PREMIUM sausage maker Cranswick is to buy rival pork supplier Bowes of Norfolk in a £17.2m takeover deal.
Hull-based Cranswick will take on the Bowes pig-meat processing arm, which employs 620 people, but will sell the company's pig rearing operations back to a team consisting of members of the Bowes family and management.
The two businesses will maintain a supply agreement.
Cranswick, which requires competition clearance for the deal, supplies Sainsbury's Taste the Difference range while Bowes supplies fresh pork cuts and joints to Tesco.
Cranswick's chairman Martin Davey said the acquisition would have no detrimental effect on East Yorkshire farmers as the group plans to increase work with pig farmers in the region.
"We saw sales of 600m last year and we're looking at further growth," he said. "We want East Yorkshire and Norfolk to grow."
He said the deal would take Cranswick into new geographic areas.
"This is a really good transaction for us," he said. "It will be immediately earnings enhancing and is part of our plan to grow the business both through acquisitions and organically.
"We have enormous respect for the Bowes business having had a trading relationship with them."
Investec Securities analyst Nicola Mallard said the acquisition reduced the number of major suppliers in the sector from four to three.
"This looks a very attractive deal for Cranswick," she said.
"It consolidates the sector further and will significantly increase Cranswick's business with Tesco in fresh pork."
In addition to providing pork for Tesco's Finest, standard and value ranges, Bowes supplies the UK's main meat manufacturers, which make hams, pies, sausages, bacon and processed meats for major retailers and restaurants.
The Bowes business, which generated sales of 75.8m and profits of 2.1m in the year to March 2008, will continue as a separate operation within Cranswick.
It will have its own management team reporting directly to Adam Couch, the Cranswick main board director responsible for the group's fresh pork operations.
The arable farming part of Bowes of Norfolk will be retained by members of the Bowes family.
The proposed sale price includes 6m of cash within the business.
Last week Cranswick reported a big leap in sales as people switch to eating British pork following celebrity chef Jamie Oliver's campaign to promote UK pig farmers.
Cranswick ended the year strongly with total sales in the final quarter jumping 11 per cent on a year ago.
It said that full year results are likely to be ahead of market forecasts.
The group said that with strong market positions, new bank facilities and well invested plants, it is well placed to continue its successful development.
Over the year Cranswick spent 2.5m on land adjacent to its Lazenby's factory in Hull.
The site will start being developed over the coming year and will help expand the group's sausage production.
Analysts at Brewin Dolphin upgraded their recommendation on Cranswick's shares.
"There appears to be increased demand for UK pork and a trend towards buying ingredients rather than ready-made meals," the broker said in a note.
"Cranswick is well positioned for this and has some good levels of new business coming on stream aiding growth in 2009 and 2010, " it added.
Over 70 per cent of the pork processed by Cranswick comes from within a 50-mile radius of its factory at Preston near Hull.
The group believes that people are becoming increasingly concerned about where their meat comes from.
THE PORK SUCCESS STORY
The Jamie Oliver pork campaign has persuaded shoppers to buy British, according to Bernard Hoggarth, chief executive of Cranswick's food division.
"Consumers want to buy British pork and retailers want to sell British pork," he said. "During these difficult economic times consumers appreciate the value it represents."
Pork is around half the price of lamb and beef – an important consideration as shoppers rein back spending during the recession.
Mr Hoggarth said pork sales rose 23 per cent and bacon sales were up 15 per cent in the final quarter. Total sales for the year were 10 per cent higher on a like-for-like basis.
Cranswick is also seeing strong demand for its products as people opt to eat in.
Mr Hoggarth said: "People are looking at ready meals and thinking 'I can prepare my own food and make an excellent quality meal that hasn't been halfway around the world'.
"Also it's about 20-25 per cent of the cost of eating out."
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Thursday 24 May 2012
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