ABF dips into cash to buy Mazola for £248m

Associated British Foods, the Silver Spoon sugar to Twinings tea group controlled by the Weston family, dipped into its £1bn cash pile yesterday, spending $360m (£248m) on Unilever's Mazola brand corn oil and corn products.

The market welcomed the long-awaited deal, which gives ABF a leading position in the US corn oils market, and the group's shares soared 8 per cent to 576p.

Peter Jackson, the chief executive, said the acquisition would enhance earnings in the first full year of ownership. "We will take significant costs out of the supply chain and improve marketing. We'd expect to get returns in the teens, similar to that from our purchase of Procter & Gamble's branded food service business last year," he said.

The acquisition will give ABF's US subsidiary 19 brands, including Mazola salad and cooking oil, Purlite cooking oil, Kingsford's cornflour and Golden Griddle table syrup.

The conglomerate, which also owns the discount clothing retailer Primark, had been under increasing pressure to spend its £902m cash pile – around one fifth of the group's stock market value – on acquisitions as lower interest rates have hit returns and held back profits. ABF has maintained that it is keen to bolster its portfolio – for the right price.

Mr Jackson said: "We are looking regularly at acquisitions. ABF has kept its money in its pocket if it's not the right deal but we don't want to leave the money getting the returns it's been getting in the bank." However, he added that the group had no deadline for spending the money.

Unilever put the Mazola brands up for sale last year because they were not classified as part of the group's core brands to drive growth under its "Path to Growth" strategy.

"These brands simply fell outside of our brand focus. Our food portfolio in North America, which includes Lipton, Hellmann's, Slimfast and Ben & Jerry's, is well positioned to achieve superior growth performance in the future," said Patrick Cescau, Unilever's food director.

The acquisition, which is subject to regulatory approval, is expected to be completed in the third quarter.