United Biscuits puts frozen foods business up for sale

UNITED BISCUITS, the McVitie's and Penguin snacks group, will today announce that it is seeking buyers for its frozen and chilled foods business, which makes the Linda McCartney range of vegetarian ready meals and sandwiches for Marks & Spencer. The move aims to raise funds to make UB a focused biscuits company.

It is understood that the group is in talks with several trade and financial buyers over the sale of the division. The price is likely to be between pounds 225m and pounds 250m.

Leslie Van de Walle, the new chief executive of United Biscuits, is currently undertaking a review of the entire business. Although United Biscuits has invested heavily in the frozen and chilled foods division over the past 10 years, Mr Van de Walle is thought to be keen to focus the group on biscuits. He is understood to believe the businesses require further substantial investment to take them forward.

"Leslie has a clear idea about what route he wants United Biscuits to go down. The proceeds will not be spent on crisps or chopped potato snacks but on biscuit products similar to Mini Cheddars," said a source close to the discussions. "The frozen and chilled food business just doesn't fit."

United Biscuits is keen to boost its portfolio of branded snacks, which currently includes Penguin biscuits, Phileas Fogg snacks, McVitie's Digestives and Skips.

While the chilled and frozen foods business does make branded goods such as San Marco pizzas, Jane Asher deserts and Linda McCartney vegetarian meals, most of its output is for supermarkets' own-brand labels. The business's attraction to bidders is its established relationships with retailers.

While Mr Van de Lalle had previously denied planning to sell the non- biscuit businesses, he had said he intended to double the size of the biscuit business to pounds 2bn in seven years. United Biscuits recently acquired Le BN, the second-largest biscuit brand in France.

Analysts have been pushing for the disposal of the business for several years. The sale follows last month's hiving off of the frozen fish business of United Biscuits' Young's subsidiary into a joint venture with Legal & General's Bluecrest Seafood, creating the UK's largest specialist fish business.

Stripping out Young's, the chilled and frozen foods arm had sales of around pounds 270m last year, which amounted to 16 per cent of the group total.

The food industry has been undergoing a period of consolidation, marked most recently by the decision of Tomkins, the conglomerate, to sell its Rank Hovis McDougall business.

In June, Hicks, Muse, Tate & Furst, the US group, acquired the food businesses of Hillsdown Holdings for pounds 537m. Unigate acquired Terranova Foods in April.

Both Unigate and Hicks are potential purchasers of the business United Biscuits is putting up for sale, as are Perkins and Northern Foods. Two German companies, Wagner and Dr Oetcher, are also said to be interested.

United Biscuits has itself been the subject of takeover rumours recently. Last month it issued a trading statement saying half-year sales had been hit by the Belgian food scares and controversy over genetically modified food. Its McVitie's biscuits business is trading well in the UK, however, with increased sales and market share gains.

Mr Van de Walle became chief executive in May, when he succeeded Eric Nicoli who left United Biscuits to take up the chairmanship of entertainment group EMI. Previously he was chief executive of the McVitie's biscuits business.

He is not thought to be planning any further disposals.

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