The acquisition of Finsbury comes during an incredibly challenging time for UK food and drink manufacturers, with insolvencies up by more than 100% during the year to June as cost inflation continues to run at double-digit pace.
The Cardiff-headquartered group - which owns Scottish bakeries Lees, Lightbody and Johnstone's - has agreed to a £143.4 million takeover offer from asset management firm DBAY that will see its shares de-listed from London's Alternative Investment Market (AIM). Investors have the option of taking 110p in cash for each share held, or there is an alternative offer for those who want to retain an equity interest in the business.
READ MORE: Lees, Lightbody & Johnstone's to come under new ownership
Figures today from the Office for National Statistics (ONS) show slowing food prices helped to drive a surprise fall in inflation in August, with the core Consumer Price Index (CPI) measurement edging down to 6.7% from 6.8% in July. However, the cost of food and non-alcoholic beverages was still up 13.6% on a year earlier as production expenses remain high with commodity prices up 22% from prior to the pandemic.
Keen to retain customers under intense financial pressure, supermarkets are driving hard bargains with their suppliers. This is why shelf prices have not gone up in line with increases in production costs, which in turn is pushing a growing number of manufacturers into financial distress.
READ MORE: Head of Lees Foods to retire following £5.7m sale to Finsbury
This should in theory present Finsbury's new owners with bargain acquisition opportunities as DBAY seeks transformational deals of "the scale required to be successful in an increasingly competitive and demanding marketplace". Via DBAY the group will also presumably have access to greater financial firepower than that afforded by its AIM listing.
Earlier this year Lees, which has been making confectionery in Coatbridge since 1931, noted the "unprecedented" challenges facing the sector. In July Finsbury said it was successfully navigating cost inflation through changes to commercial terms and operating improvements, and this would need to remain a focus going forward.
There will no doubt be more on that when the group publishes its annual results on Tuesday, having already flagged a 16% rise in revenues in a trading update in July.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here