Bright Food adds Weetabix to foreign portfolio

A second deal has come much quicker. Last week, the Chinese food giant announced that it would buy a 60% interest in UK cereals company Weetabix from Lion Capital.

The transaction values the company at GBP1.2 billion ($1.9 billion) including debt, and is the largest outbound acquisition by a Chinese company in the food and beverage industry.

Lion Capital will retain the remaining 40% for the time being and support Bright Food in its plans to expand the business in Asia. "They don't expect to be there forever but Bright Food's plans are very exciting and they feel they can add value through their knowledge of the market and experience with consumer brands," says Michael Francis, London managing partner at Weil, which advised Lion Capital on the transaction.

In addition to its eponymous cereal brand, Weetabix is best known for producing Alpen, Weetos and Ready Brek. It is difficult to see these gaining a following in China in the near term - it may be different in the long term - but Bright Food is arguably well positioned to aid distribution elsewhere in the region through Manassen's network. The acquisition also offers the Chinese company exposure to global brand management expertise.

Market sources suggest that Lion Capital could fully exit Weetabix in 2-3 years, by which point it should have made close to a 5x return on its initial investment. The UK private equity firm took Weetabix private in 2004 in a deal that valued the business at GBP642 million and has reportedly already generated a 3x return through several dividend payments.

According to Francis, Bright Food and Lion Capital had been in discussions long before the lawyers got involved. Reports of negotiations first emerged a few weeks ago but Weetabix has been on the block since the middle of last year. The sale comes after Lion Capital secured a debt refinancing package worth GBP900 million.

Weil has worked on several attempts to exit Weetabix in the last couple of years, all of which collapsed before a final agreement could be reached. It is notable that on this occasion Lion opted against an auction. This strategy wouldn't have been popular with Bright Food and the PE firm might have lost out on the opportunity to retain a stake in the business, and earn more dividends, as it targets new markets.

"In an auction situation Chinese buyers are at a disadvantage," says Anthony Wang, a partner with Weil in Shanghai, who also worked on the deal. "There are cultural issues, problems with the timing and with local stakeholders, and they generally aren't familiar with the process."

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• Topics
• Exits
• Consumer
• Europe
• Europe
• Trade sale
• Consumer
• Lion Capital