Associated British Foods (ABF) has bought UK premium cereal maker Dorset Cereals in a deal rumoured to be worth £50m ($83.7m) - taking its cereal brand tally up to two.
ABF's other cereal brand - Jordons - was absorbed into the business back in 2008 when it was merged with Ryvita. Dorset Cereals will now join Jordons as another cereal offering under the ABF umbrella.
Speaking to BakeryandSnacks.com about the deal, Darren Shirley, analyst at Shore Capital, said Dorset Cereals was a "nice fit" for ABF. “It’s a good brand and I would suggest the [cereal] market is in decent growth and obviously Dorset is at the premium end of that,” he said.
Current owners Wellness Foods bought Dorset for £50m ($83.7m) back in 2008. Dorset Cereals ranked sixth in the UK breakfast cereal market in 2013, representing a 2% share of the overall retail value, according to Euromonitor International. ABF with its Jordons brand ranked ahead of Dorset in fifth place, behind PepsiCo, Cereal Partners Worldwide, Bright Food and market leader Kellogg.
Dorset Cereals manufactures premium porridge, muesli, granola and cereal bars, and launched a new oat-based granola line in December, 2013. Its rustic, box packages have been touted as stand-out in design , sitting strong in a competitive market.
Rumors of a sale started late last year with Kellogg and Weetabix among supposed bidders.
In an emailed statement to BakeryandSnacks.com, ABF said: “We can confirm that The Jordans & Ryvita Company, part of Associated British Foods, has reached an agreement to purchase the Dorset Cereals brand from Wellness Foods, subject to regulatory approval.”
ABF refused to comment any further, stating it was “inappropriate” to do so at this stage.
What it said, however, was that its intention was to maintain Dorset Cereals’ existing manufacturing base in Poundbury, Dorset and that the cereal firm would continue to operate as Wellness Foods until the acquisition had been cleared by regulatory authorities.
'Well-trodden' bolt-on strategy
Shirley said ABF would likely keep Dorset management, as this was a strategy they often took with bolt-on acquisitions.
“The ABF strategy is to typically buy good, family-run businesses and bring them within the umbrella of ABF – give them the benefit of the greater scale and balance sheet – but let the existing management team continue to run the business. That’s a well-trodden path by ABF.”