Kraft ruled out as potential bidder after United Biscuits hints at sale

By Oliver Nieburg

- Last updated on GMT

Related tags Ub United biscuits

Analyst says Kraft out of the running for UB as it prepares for costly split
Analyst says Kraft out of the running for UB as it prepares for costly split
Kraft Foods is in too delicate a position to bid for United Biscuits (UB) says an analyst after UB dropped its first sales hint yesterday.

UB suggested to BakeryAndSnacks.com yesterday that the company would be sold as it announced a separate snacks division, KP Snacks, from its larger biscuits business. (See HERE​)

Director of insight for Mintel Food and Drink, Marcia Mogelonsky, told this site that UB could undercut its authority as a major market player if it sent mixed messages about a sale and failed to deliver, which could make potential bidders see UB as “too weak to be attractive”.

She ruled Kraft out of the running, but said Kellogg or Asian companies could be circling.

Kraft in no state to bid for UB

“Kraft is in a somewhat delicate position as it is poised for its big break into two companies,​“ she said.

Kraft is preparing to split into two publicly traded companies: a global snacks business called Mondelez International and a North American grocery, which will retain the Kraft Foods name. The split is due to be completed by 1 October this year.

Timing not right for Kraft

Kraft incurred $39m in costs related to the breakup in the first quarter of 2012. Overall costs for the split are estimated at around $1.7bn.

The company has also embarked on a restructuring programme due to be complete by 2014, which has already accrued around $80m in costs.

Mogelonsky pointed out that Kraft is also currently paying integration costs for its 2010 Cadbury acquisition, which it has around $1bn left to pay by 2013.

“This does not sound like a company that needs another big expense right now,”​ she said.

Kraft-s-Nick-Bunker-to-lead-new-KP-Snacks-division_dnm_headline
Nick Bunker former Kraft UK president to lead KP Snacks

Mongelonsky said that while Kraft was lacking in the salty snacks department, with UB brands like Hula Hoops and Twiglets seeming a welcome addition, the timing wasn’t right and she expected it to focus its efforts on Mondelez.

Bunker appointment

UB recently appointed Kraft UK and Ireland president Nick Bunker to head its new snack division KP Snacks.

Asked why UB would appoint Bunker if it was going to sell the business, Mogelonsky said: “Bunker's critical role at Kraft was that of a ‘fence mender’, patching up and smoothing over the sizable animosities between Cadbury and Kraft after the merger took place.”

“That reputation would be an excellent attribute for a person heading up UB - if UB is to be appropriated/sold/merged to another entity, such a situation could easily arise again.”

Bunker had a spell at UB in the Nineties, which Mongelonsky said could help him to play peacemaker if a sale was finalised.

Biscuits and snacks: Buy one or buy together?

 UB was tight-lipped yesterday on whether the business would be sold as a whole or as separate snacks and biscuits businesses. 

Mogelonsky said she expected the divisions to be sold separately.

The snack division may interest Intersnack and Kellogg, but both firms would probably not be keen on the biscuit business, she said.

United Biscuits brands
United Biscuits snack brands include McCoy's and Twiglets, while McVitie's is the flagship brand of the biscuit division

‘March across the west’ for biscuits

Mogelonsky previously told this site UB may appeal to Asian suitors.

Today she said: “Given the current economic situation it is not clear if a Chinese company will continue the ‘march across the west’, as Bright did with Weetabix.

“But, I still think we should not discount interest from Lotte or Orion for biscuits as an outside possibility. And of course, state-sponsored Bright, although rebuffed once, may try again.”

UB’s private equity owners Blackstone Group LP and PAI Partners failed in a bid to sell its joint biscuit and salty snacks business for £2bn to Chinese firm Bright Foods in 2010.

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