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Sweet lift for Finsbury on takeover talk

CAKE maker Finsbury Foods yesterday confirmed it &nbsp;had received a preliminary bid approach, stirring investors and its share price.<br /><br />But the firm said that talks were in the very early stages and said there was &ldquo;considerable doubt that an offer will be forthcoming from this party&rdquo;.<br /><br />The group, which owns the rights to Weight Watchers&rsquo; low-fat brand of cakes, recently saw its shares slump sharply after it issued a profits warning. This prompted speculation that the firm might become a bid target for a rival looking to acquire it on the cheap.<br /><br />The group said in March that its &nbsp;pre-tax profits for the half year to end December were down 45 per cent at &pound;1.8m, due to the rising cost of raw materials, despite boosting revenues by 11 per cent to &pound;92.1m.<br /><br />Due to the group&rsquo;s acquisition spree, which saw it snap up firms like Memory Lane Cakes, it has amassed huge debts of &pound;44m.<br /><br />But Finsbury, which is the leading maker of celebration cakes, is currently only valued at around &pound;11m.<br /><br />David Kuo, analyst at fool.co.uk, said: &ldquo;Despite the shares being good value, it is likely that any deal will crumble due to the group&rsquo;s debt position. It is questionable whether any bidder would be able to take on the group&rsquo;s debt position.&rdquo;<br /><br />A supermarket grocer, Unilever and Premier Foods have all been tipped as potential interested parties because of Finsbury&rsquo;s array of brands. But Premier&rsquo;s recent rights issue to bolster its balance sheet suggests the group is more focused on minimising its own debt.<br /><br />Finsbury&rsquo;s shares closed up 4.7 per cent at 22.5p.