ABF sells Burton's Biscuits to Hicks, Muse for £130m

Burton'S Biscuits, maker of lunch-box favourites such as Jammie Dodgers and Wagon Wheels, is to be sold to the American venture capitalist Hicks, Muse, Tate & Furst for £130m after more than half a century as part of Associated British Foods.

Burton'S Biscuits, maker of lunch-box favourites such as Jammie Dodgers and Wagon Wheels, is to be sold to the American venture capitalist Hicks, Muse, Tate & Furst for £130m after more than half a century as part of Associated British Foods.

The debt-free deal will lead to the creation of Britain's second-largest player in the biscuit market through the merger of Burton's with Horizon Biscuits, which the US firm acquired last year as part of its purchase of the Hillsdown group.

Associated, which also owns Twinings, Allinson and British Sugar, bought Burton's in 1949 but has decided to divest itself of businesses that lack the scale needed for expansion. Earlier this year it sold its Allied ice-cream business, and plans to expand its Primark chain and US food ingredients arms. Yesterday the group's share price drifted from 398p to close at 396p.

Hicks, whose offer is believed to have trumped a rival bid from Duke Street Capital, said the combination of Horizon and Burton's would yield "significant benefits". It previously withdrew from the bidding for United Biscuits, which was later sold to a consortium for £1.26bn.

Burton's, which has factories in northern England, Wales and Scotland, and employs 2,500 staff, had sales last year of £171.1m.

A Hicks spokeswoman said yesterday: "We see biscuits as a growth area." The new entity will enjoy a 20 per cent UK market share, including the Maryland brand. But Associated said Burton's did not fit its profile of companies offering sustainable growth and cash generation. "Burton's ... was not really big enough to develop in its own right," it said yesterday. The group also said it had sold Rowallan Creameries, a margarine and bakery fats business with sales of £28m last year, to Hull-based Anglia Oils for an undisclosed sum.

Associated, valued at £4.3bn and controlled by the Weston family, has itself faced calls from investors for a break-up.

Nicola Mallard at ING Barings, said: "Burton's is quite a small player ... and from Associated's point of view it was a question of getting bigger or getting out."