After six months of coronavirus-induced quarantine, food and drink M&A is back in rude health as deals put on pause in March restart.

Hot on the heels of EG Group tycoons Mohsin and Zuber Issa buying Asda last week, there have been updates on the sale of Hovis, with Italy’s Newlat confirming it has made an offer for the bread maker, and Ferrero is reportedly close to sealing a £250m deal for Fox’s Biscuits.

Ferrero could reveal a takeover of the biscuit brand from Ranjit Boparan’s 2 Sisters Food Group later this week, if the story by Sky News turns out to be accurate.

A sale would allow the ‘Chicken King’ to focus much more on his core poultry business and help reduce the group’s £600m-plus debt pile.

Boparan is not renowned as a branded guy and has slowly sold off all of 2 Sisters’ portfolio in recent years, with Goodfella’s going to Nomad Foods in 2018 and the Matthew Walker Christmas puddings business picked up by Valeo in 2019. Only Holland’s Pies would remain in the £2.7bn turnover group if Fox’s goes to Ferrero.

However, despite the need to strengthen the 2 Sisters balance sheet, the secretive entrepreneur is also known as a buyer rather than a seller, leading to a reluctance to offload Fox’s, which generates a decent amount of cash and has been a good performer relative to the rest of the group.

The past six years are littered with failed deals and near misses for Fox’s. Burton’s Biscuits has courted Boparan numerous times, abandoning an acquisition in 2014 to chase after the bigger prize of United Biscuits instead. After being thwarted by Yildiz in the race for the McVitie’s and Jaffa Cakes maker, Burton’s owner, the Ontario Teachers’ Pension Plan, vowed to do more deals.

Another £340m tilt at Fox’s by Burton’s in 2016 came to nothing. And in early 2018, funding fell through at the final hurdle for a complicated merger of the two biscuit suppliers that was to lead to an IPO. The Jammie Dodgers maker was also reportedly in the race yet again, but this time beaten by Ferrero.

Boparan has also explored floating Fox’s as a standalone business in the past and rebuffed other bids.

This time, however, there may be more of an urgency to sell – hence the lower price tag of £250m – after 2 Sisters suffered a strained pandemic, with the processor forced to temporarily close two plants due to outbreaks.

A sale would be great news for Fox’s, which has more chance of fulfilling its potential under an owner whose core business is sweet treats.

It’s a good fit for Ferrero and bolsters the Italian group’s ambitions to follow in the footsteps of Cadbury owner Mondelez into the biscuit category, as well as continuing to reduce the Ferrero Rocher and Kinder maker’s reliance on chocolate.

Ferrero has hit the acquisition trail with a fervour since it bought Thorntons in 2015 for £112m, the first-ever branded deal in the group’s long history.

A purchase of Belgian luxury biscuit brand Delacre from Pladis soon followed in 2016, which included the DeliChoc brand available in the UK. And in 2019 it paid $1.3bn (£1bn) for a number of non-cereal food assets from Kellogg’s, including established cookie brands Keebler, Famous Amos and Mother’s.

The group has also launched Nutella Biscuits in a number of markets globally, including the UK this year.

A takeover of Fox’s would see it become the fourth biggest player in the growing UK sweet biscuits market overnight and a serious competitor to Pladis, Nestlé, Mondelez and Burton’s.

There has been a sharp spike in demand for biscuits as the nation works from home in the wake of the coronavirus crisis, with the branded side of the whole category recording 5.1% growth in value to £1.3bn in the past year [Nielsen 52 w/e 7 September 2020].

Owned by a company with the resources, ambition and sector expertise of Ferrero rather than a chicken processor, Fox’s is surely positioned to cause its rivals serious headaches.

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