Sweet lift for Finsbury on takeover talk
CAKE maker Finsbury Foods yesterday confirmed it had received a preliminary bid approach, stirring investors and its share price.
But the firm said that talks were in the very early stages and said there was “considerable doubt that an offer will be forthcoming from this party”.
The group, which owns the rights to Weight Watchers’ low-fat brand of cakes, recently saw its shares slump sharply after it issued a profits warning. This prompted speculation that the firm might become a bid target for a rival looking to acquire it on the cheap.
The group said in March that its pre-tax profits for the half year to end December were down 45 per cent at £1.8m, due to the rising cost of raw materials, despite boosting revenues by 11 per cent to £92.1m.
Due to the group’s acquisition spree, which saw it snap up firms like Memory Lane Cakes, it has amassed huge debts of £44m.
But Finsbury, which is the leading maker of celebration cakes, is currently only valued at around £11m.
David Kuo, analyst at fool.co.uk, said: “Despite the shares being good value, it is likely that any deal will crumble due to the group’s debt position. It is questionable whether any bidder would be able to take on the group’s debt position.”
A supermarket grocer, Unilever and Premier Foods have all been tipped as potential interested parties because of Finsbury’s array of brands. But Premier’s recent rights issue to bolster its balance sheet suggests the group is more focused on minimising its own debt.
Finsbury’s shares closed up 4.7 per cent at 22.5p.