Wednesday, 29 September 2010

United Biscuits – Are Bright Foods set to pay too much for their Jaffa Cakes?

United Biscuits – Are Bright Foods set to pay too much for their Jaffa Cakes?

With Bright Foods, the Chinese food giant in talks to acquire United Biscuits we have to ask one pertinent question - Is United really worth the reported £2bn?

According to our calculations, the company is probably worth closer to £1.5bn. After its assets and liabilities have been taken into account its equity value is probably closer to £1.2bn. So, while United has increased in value in each of the last 2 years, the current owners, it is worth considerably less than the rumoured price – the current owners are getting a good deal.

Clearly, Bright Foods are after United for its portfolio of brands rather than for short term financial gain and they are prepared to pay a premium for it. Hopefully, the jobs and investment will stay in the UK and not be moved overseas like in other takeovers of this type. Will new owners at United Biscuits do the same thing that Kraft did at Cadburys?

Click here to see which of the UK’s Food Manufacturers is likely to be the next big takeover story

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