Cake Box has agreed to buy Asian sweet manufacturer Ambala Foods for £22m in a deal partly funded by new shares.
Ambala is a family-run manufacturer and retailer of Asian sweets, operating 22 stores across the country.
Cake Box, the UK’s largest franchise retailer of fresh cakes, said the deal consisted of £16m for Ambala itself and £6m for its manufacturing facility in Welwyn Garden City.
It will be funded by topping up the company’s cash reserves with a mix of new shares worth £7m and loans worth £15m.
It will see products cross sold in both Cake Box and Ambala stores, alongside plans to significantly expand Ambala’s online presence.
Cake Box noted there was a “significant opportunity” to improve Ambala’s profitability and had already spotted at least £1m in efficiency gains across production and logistics.
“This strategic acquisition represents a significant opportunity to leverage the strengths of both brands to expand our market presence and accelerate our growth,” said Cake Box CEO Sukh Chamdal.
“Ambala’s rich heritage and established customer base complement Cake Box’s values and commitment to quality and innovation.”
Wayne Brown, an analyst at Panmure Liberum, estimated the deal could boost Cake Box’s earnings-per-share by 5% in the first year and 7% once the full synergies are achieved.
“We think the Ambala brand is synergistic to Cake Box which currently over-indexes in Asian dominated communities, allowing for significant cross selling and new store opportunities with existing Cake Box franchisees,” he said.
Its share price is down around 2% since the announcement.
Cake Box’s last set of results reported a rise in revenue of 4.3% to £18.7m in the six months to 30 September. This was driven by new store openings, with the business now up to 232 outlets.
In an update this morning, it said the business had continued to trade strongly since with the weeks over Christmas and new year delivering over £4m in sales.
It was on track to open more than 25 new stores by the end of the year, it added.
Ambala is looking to also to grow its store numbers, with four more planned for 2025 and six planned for 2026.
Its revenue grew quickly from from £11.2m in 2021 to £14.0m in 2023. However, the business said it underperformed last year following the death of its founder and sole shareholder, Mohammed Ali Khan, in late 2023.
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