United Biscuits takes Phileas Fogg snack for pounds 24m

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The Independent Online
REST assured. Despite yesterday's sale of the parent company, Phileas Fogg tortilla chips will still be made in Medomsley Road, Consett.

KP, the snacks part of the food giant United Biscuits, has paid pounds 24m for Derwent Valley Food, the company behind the Fogg brand of chips, Punjab Puri and other exotic nibbles.

In the process Roger McKechnie, Derwent's chairman and managing director, has realised a profit 260 times his original investment 10 years ago. Mr McKechnie gets pounds 7m, half in cash, half in UB shares, out of the deal. In 1982 he put up pounds 27,000 for the start-up business.

3i, the venture capital organisation, took a 25 per cent stake for pounds 235,000 in 1982. Its pounds 6m share of UB's money represents a 25-fold return on its initial stake.

Before setting up Derwent, Mr McKechnie worked for the makers of Tudor crisps. He said the inspiration for Phileas Fogg products came from ideas that were brought to Tudor but turned away.

Mr McKechnie will join UB but continue to run Derwent. He has been promised independence, but with access to UB for development capital.

He has also been assured that Medomsley Road in the County Durham town will remain as Derwent's base. It employs 300 people in the town, once almost totally dependent on British Steel. Mr McKechnie hopes to double that figure in five years. He yesterday paid tribute to the Government, which made grants under Consett's enterprise zone status, for Derwent's success.

Derwent has sales of pounds 24m and made a trading profit of pounds 2m in its last year. UB said its purchase price was 20 times after-tax earnings. However, it expects to reap rewards quickly as Derwent benefits from the conglomerate's buying power in raw material and advertising.

UB, one of a handful of suitors entertained by Derwent, had the edge because of its extensive distribution network, Mr McKechnie said. UB has access to 50,000 outlets in Britain - Phileas Fogg products are currently available in just 8,000.

For UB, Derwent is the latest in a string of small to medium-sized acquisitions. Last month it paid pounds 47m for Bake-Line, a US biscuit maker. Last week UB also signalled it was prepared to sell its Terry's chocolate business, which analysts believe may fetch pounds 250m.

The Derwent deal awaits approval from the Office of Fair Trading, which is not a foregone conclusion. If UB gets the go- ahead, its debt will rise above 90 per cent of net assets.