Ranjit Boparan is more likely to sell Holland's Pies than spend the millions required to update its Accrington production plant, according to senior industry sources.
The Northern Foods-owned factory, which has been in operation since 1907 and has 400 staff, needed £10m to £20m capital investment to remain viable, they claimed. However, Boparan was unlikely to invest this given the overcapacity in the UK pie market.
"They've got to build a new plant, enter into a joint venture with somebody else or divest it. I'd be surprised if the factory in its current state had more than three years' life," said a source close to the company. "I think Boparan will sell it because he wants to pay down debt for the Northern purchase quickly. Pies don't offer as many synergies as other parts of Northern, especially if, to get off the blocks, he's got to sink a serious amount of money in."
Baker Tilly M&A and private equity partner Kirsty Sandwell agreed. "It's a good heritage brand and people pay for that," she added. "It might be worth more to the business through a sale than investing in the factory and staying in the pie market as there are some serious players out there."
Northern Foods, which was recently taken over by Boparan, is understood to have considered shifting Holland's production to West Ireland in the wake of the acquisition of the McDougall's frozen pie brand in 2005, but plans were dropped for currency exchange reasons.
Holland's said the site continued to be profitable but investment in the ageing site could be required in the medium term.
Boparan has been touring Northern's sites and is expected to finalise an integration plan in the next few months. He will be required to seek pension trustee consent for any divestments where proceeds exceed £20m.
A Northern spokesman said Boparan's vision was to grow the combined business from £2bn sales per year to £3bn by 2015.
The Northern Foods-owned factory, which has been in operation since 1907 and has 400 staff, needed £10m to £20m capital investment to remain viable, they claimed. However, Boparan was unlikely to invest this given the overcapacity in the UK pie market.
"They've got to build a new plant, enter into a joint venture with somebody else or divest it. I'd be surprised if the factory in its current state had more than three years' life," said a source close to the company. "I think Boparan will sell it because he wants to pay down debt for the Northern purchase quickly. Pies don't offer as many synergies as other parts of Northern, especially if, to get off the blocks, he's got to sink a serious amount of money in."
Baker Tilly M&A and private equity partner Kirsty Sandwell agreed. "It's a good heritage brand and people pay for that," she added. "It might be worth more to the business through a sale than investing in the factory and staying in the pie market as there are some serious players out there."
Northern Foods, which was recently taken over by Boparan, is understood to have considered shifting Holland's production to West Ireland in the wake of the acquisition of the McDougall's frozen pie brand in 2005, but plans were dropped for currency exchange reasons.
Holland's said the site continued to be profitable but investment in the ageing site could be required in the medium term.
Boparan has been touring Northern's sites and is expected to finalise an integration plan in the next few months. He will be required to seek pension trustee consent for any divestments where proceeds exceed £20m.
A Northern spokesman said Boparan's vision was to grow the combined business from £2bn sales per year to £3bn by 2015.
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