Premier in talks to expand into biscuits and soup

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Premier Foods, the maker of Ambrosia rice and Branston Pickle, is in talks to acquire large chunks of United Biscuits and the US group Campbell Soup.

The news sent its shares up nearly 3 per cent to 305.5p yesterday.

Premier is thought to be fronting a consortium to carve up the privately owned UB and acquire its UK arm for an estimated £720m, as well as being tipped as a front-runner for buying Campbell's British operations for about £450m.

The group has teamed up with private-equity players to make a break-up bid for UB, best known for its McVitie's biscuit brand, Jaffa cakes, KP snacks and Hula Hoops. UB is tipped to be worth about £2.3bn including debt.

UB was taken private in 2000 by the venture capitalists Cinven, PAI, MidOcean Partners and Kraft, which are considering a stock market flotation. But the float could be shelved if Premier and its partners come up with an acceptable offer. UB's UK arm is estimated to have sales of £500m and earnings before interest, tax, depreciation and amortisation of £80m.

Premier's chief executive Robert Schofield hails from UB, where he worked for 16 years until 2000, including as managing director of the UK business.

The sale of Campbell's UK and Ireland business, which has sales of £280m, is being handled by Goldman Sachs. Other potential bidders include Heinz and the Hovis maker RHM, which is also touted as a possible target for Premier.

Graham Jones at Panmure Gordon said that with a market value of £740m and net debt of £572m, Premier has scope for £200m of debt-funded acquisitions, while anything beyond that would require equity issuance.