- Finsbury Food has agreed to acquire the Fletchers Group, the group of bakeries that produces morning goods and specialist bread products for leading UK grocery retailers and foodservice customers, for £56.0m.

Finsbury Food said the consideration will be funded through a significantly oversubscribed placing of new ordinary shares raising £35.0m and new debt facilities.

The directors expect the acquisition to be earnings enhancing during its first full year of ownership and allows the group to benefit from significant cash generation that will support a progressive dividend policy for the Enlarged Group going forward. Finsbury Food says the enlarged group will be one of the largest speciality bakery groups in the UK, with sales approaching £300m and a broad spread of customers across the food retail and foodservice channels.

Strategic and financial benefits include:

- complementary product ranges and new food service channels;

- retail customer diversification;

- the benefits of significant capital investment within Fletchers manufacturing;

- a multi-channel platform for further acquisitions in due course.

Finsbury Food said the acquisition will provide a platform for the group to address the attractive UK foodservice bakery market, which is worth approximately £900m per annum, 70% of which is morning goods. Both Finsbury Food and Fletchers supply products to the growing morning goods sector.

As part of a trading update accompanying the transaction, Finsbury Food today confirmed it has had a positive trading performance since its year end in June, with sales 5% ahead of prior year through a combination of volume, mix and price.

Due to the size of the acquisition, it will be treated as a reverse takeover and will require shareholder approval.

Chief executive John Duffy said: "The acquisition of Fletchers is a transformational development for the Group, and will add scale to the effect that we will be one of the largest speciality bakery groups in the UK.

"Fletchers is a highly complementary business, which broadens the Finsbury UK speciality bakery product, customer and channel growth potential and will provide a strong platform for the Group to address the Foodservice markets. We believe the Enlarged Group will be in a strong position for new licensing arrangements, joint ventures and stronger customer and brand relationships.

"By servicing both the cake and bakery market, through both retail and foodservice, the Enlarged Group will have a diversified product and customer offering, and greater potential for driving growth for our shareholders. We look forward to welcoming the Fletchers team and customers into Finsbury Food and continuing to provide our newly broadened customer base with high quality products and service."

At 8:58am: [LON:FIF] Finsbury Food Group PLC share price was -0.5p at 61p

Story provided by