Deal-hungry Valeo Foods is on the verge of snapping up yet another British consumer brand, hoping that doubling down on its presence in the struggling sugary snacks space will sweeten its existing investment in the category.

Although yet to be confirmed, it is understood Black Jack and Sherbet Fountain maker Tangerine is on the verge of a £100m-plus sale to Capvest-owned Valeo.

The £100m-plus deal for Tangerine is expected to be completed shortly and represents the Irish group’s second big bet on the declining sugar confectionery category, after it secured a €100m deal to purchase Big Bear Confectionery in January 2018.

Tangerine’s owner, PE giant Blackstone, has been looking for a sale since the start of the year, but suitors were expected to be thinner on the ground than last year’s hotly contested auction for Tangerine’s popcorn brand Butterkist.

Blackstone purchased the Yorkshire-based confectioner for around £120m in 2011 and decided to dismantle the group last year to exit its investment, selling Butterkist to Intersnack in July 2017 to cash in on the booming popcorn trend.

“It made sense to sell Butterkist on its own because popcorn is very different from sugar confectionery - it appeals to a different sort of buyer,” a City source says. “It appeals to snacking buyers and they got a fabulous price on Butterkist.”

Intersnack had no intention of purchasing the sugary confectionery brands. Nor did other interested parties such as Japanese snack company Calbee.

The sale of Butterkist was the “first priority”, sources say, while it simultaneously tried “to repair and improve some of the issues around sugar confectionery”.

Tangerine’s last public accounts, for the year ending December 2016, showed an 8.3% decline in sales to £139m, while pre-tax profits slumped by 65%, to £3.3m, as its retro brands proved unable to avoid the decline in the wider category.

But sources close to the deal say Tangerine CEO Anthony Francheterre has done a “fantastic job” to turn around the business since then and an auction was launched in February with performance back on an improving trend.

City observers suggested Valeo could easily have been the “only serious buyer”, given the malaise across the confectionery category, which would have undoubtedly put off any PE buyers, and the small number of active businesses in the highly consolidated market.

Valeo’s plans

It is thought Valeo is keen to unite its confectionery brands once the acquisition is complete, to drive cost efficiency and utilise Tangerine’s existing management team and infrastructure.

It is understood a number of Big Bear’s directors left the business around the time of the sale to Valeo, with Rowse Honey director Ian Ainsworth running the business at arms’ length for a number of months.

Consolidation is also important to improve Valeo’s sprawling portfolio, which includes sugar confectionery, biscuits, honey, orange juice and more. The acquisition will also help to stabilise the company’s presence in the UK, with its brands also based in Ireland and Italy.

Although Tangerine’s last accounts make for sober reading, the source close to the deal insists the business is in better shape than Big Bear was at the time it was acquired.

“The position of the business is much better,” the industry source says. “It’s far from being a basket case. Under the circumstances it is fairly robust.”

Earlier this year, Tangerine brought all its classic brands, which also include Dip Dab and Fruit Salad, under the Barratt name, after a five-year dalliance with the Candyland stable, in a bid to tap into the appeal of retro sweets.

City sources suggest Valeo may even use the addition of Tangerine for further consolidation in the category, highlighting that Netherlands-based European Candy could be ripe for acquisition in the next couple of years.

The buy and build strategy in a structurally declining category is not without risk, but given Tangerine makes Black Jacks, a penchant for gambling is perhaps appropriate. Tangerine gives Valeo more of a chance to beat the house than simply squeezing Big Bear.

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