The Investment Column: Hungry predator may find United Biscuits a tasty bite

ARE WE finally nearing the endgame for United Biscuits? For years it's been looking like the Incredible Shrinking Company. The McVitie's biscuits and KP snacks company is now attaining a size and structure that could make it a tasty snack for hungry venture capital groups such as Hicks, Muse Tate & Furst, the US fund that recently gobbled Hillsdown Holdings.

With the troublesome Keebler business in the US long gone - its value has since soared - and the Young's frozen-food operation hived off into a joint venture, there's only one non-core business left to go. That's the chilled and frozen operation, valued at pounds 250m. A deal should be finalised in the next few weeks. Unigate and Hicks, Muse are tipped as possible buyers.

This will leave United Biscuits focused on biscuits and snacks where new chief executive Leslie Van del Walle has big plans. He admits that a 23 per cent crumble in half-year pre-exceptional profits to pounds 40m is unacceptable.

The dioxin food scare in Belgium, fall-out from the US trade war and heavy exceptional charges on disposals helped pushed the group to a pounds 13m loss.

Mr del Walle has a cost-cutting programme, which will include the merger of the snacks and McVitie's biscuits operations. An additional pounds 30m is to be spent marketing top brands such as Penguin, Homewheat and Hob Nobs, which have been growing sales at 11 per cent.

The drag remains the long tail of secondary brands and own-label biscuits and crisps, which are being hammered by rivals such as Walkers.

UB faces a long haul back to financial respectability. The increasingly powerful supermarkets are sure to keep pressure on its margins.

On ABN Amro's reduced full-year profit forecast of pounds 100m the shares - down 5.5p at 188p - trade on an unexciting forward multiple of 12. With a bid possible, the shares are a hold.

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