A leading cake maker will nearly double in size after striking a £56m deal to buy a supplier of bread and pastries to the major supermarkets.
Cardiff-based Finsbury Food has agreed to buy the Fletchers Group of Bakeries, which will see the speciality cake firm expand its presence in buns, muffins, scones and baguettes.
Both firms are major suppliers to the country’s biggest supermarkets, including Tesco, Sainsbury’s and Bradford-based Morrisons.
Finsbury is purchasing the Sheffield-based bakers from Vision Capital, the private equity firm which bought the business as part of a wider £160m deal with Northern Foods in 2007.
Finsbury is acquiring bakeries in Sheffield, Manchester and London employing just over 600 staff.
They will sit alongside Finsbury’s own UK plants in Cardiff, Salisbury and Lanarkshire, with the enlarged group employing 3,000 staff.
Finsbury said the deal will make the enlarged business one of the largest speciality bakery groups in the UK with sales approaching £300m a year.
Through its divisions Memory Lane Cakes and Lightbody, Finsbury is the second largest supplier of cake to the UK’s supermarkets, with a 20 per cent share of the total pre-packed cake market.
It believes the takeover will allow it to extend its presence in UK supermarkets as well as restaurants, coffee shops, bars and fast food outlets.
Finsbury said it will fund the purchase, which is expected to complete on October 30, through an institutional placing with investors raising £35m as well as bank debt.
Finsbury Food chief executive John Duffy described the acquisition of Fletchers as a transformational development for the group.
He added: “By servicing both the cake and bakery market, through both retail and foodservice, the enlarged group will have a diversified product and customer offering, and greater potential for driving growth for our shareholders.”
Finsbury’s profits for the year to June 28 rose 18 per cent to £6.5m, with sales at the start of the new financial year up five per cent through a combination of volume, mix and pricing.
Andrew Rich, partner at Vision Capital, said: “Finsbury is the ideal partner to take Fletchers into the next phase of its development and the combined group is well positioned to prosper.”
Fletchers was founded in Sheffield in 1895 by George Henry Fletcher.
James Murray, a partner at KPMG who advised Vision Capital on the sale of Fletchers Group, said: “The deal is representative of the wave of consolidation we are seeing in the sector as businesses seek to expand scale.”