Is Weetabix not to the taste of Bright Food or is there more to it than just a lack of appetite?

It is often stated that most M&A deals do not return shareholder value, and as everyone knows, they are time consuming and expensive to undertake. So why would any buyer having completed an acquisition a little over one year ago be linked with a potential exit already? Buyer remorse? A complete U-turn in strategy? An offer from another acquiror that is simply too good to turn down? Who knows?

That has to be the question most people are asking themselves given speculation currently emerging that Bright Food, the Chinese state controlled food group, is supposedly considering an IPO of Weetabix, the UK-based breakfast cereal manufacturer. But if you look a little deeper into the situation there are some much less suspicious motives.

Bright Foods paid just over USD 1.10 billion for a 60 per cent stake in Weetabix on 5th November 2012, so literally 1 year and just over 2 weeks ago. The remaining 40 per cent was retained by Lion Capital, the latest incarnation of Hicks Muse Tate, which took over and delisted Weetabix back in early 2004. In addition, the company has been linked unsuccessfully to a number of other food companies, including GNC, United Biscuits, and Yoplait, as it pursues a strategy of buying overseas food brands.

However, it was successful in its acquisition of the New Zealand-based dairy company Synlait, when it paid GBP 38 million for 51 per cent in July 2010. And here may lie the key to the early IPO strategy in relation to Weetabix. Synlait listed on the New Zealand Stock Exchange in July 2013, raising just over GBP 61 million, but with Bright Foods retaining 39 per cent and thus showing a healthy return on investment in a relatively short period of time and with the potential for a greater windfall should they relinquish more of their shares.

Could this be the driver for Bright to be talking about a potential IPO in Hong Kong so soon after taking their first bite of the cereal market?

Filed under: China, dealmaking, exit, food, IPO, listing, UK, cereal