After last week's profit warning, it was almost inevitable that the UK's Northern Foods would be forced to take action to bolster its ailing business. Today it has done just that with the sale of its Fox's confectionery unit - always likely to be considered as a non-core operation - to a management buy in (MBI).
Northern Foods announced last week that its profits for the first half of 2003 would be well below expectations as a result of significant increases in raw material costs, an announcement which cost chief executive Jo Stewart his job.
The new management team, led by executive chairman Peter Blackburn, has wasted no time in taking action to refocus the company on its main business of producing convenience and other foods for the major retail chains, deciding to sell off the Fox's Confectionery business to Big Bear, a new company formed by a management buy-in team.
Northern Foods will receive £7.0 million (€10m) for Fox's Confectionery, as well as a further £2.4 million to cover the company's debts.
Fox's Confectionery produces a number of small but well-known brands, including Fox's Glacier Mints and Fruits, Paynes Poppets, Just Brazils and XXX Mints. Northern acquired the Fox's Glacier Mints business from Nestle UK for £8.0 million in 2001, and subsequently integrated it with the Paynes confectionery operation which it had purchased for £9.8 million in 1998.
The Lift Lemon Tea brand, which was acquired as part of Paynes, was sold to Hicks, Muse, Tate & Furst for £8.2 million in 2001. Production of the Paynes confectionery brands was transferred to Fox's facility in Leicester last year and Northern is still looking for a buyer for the Paynes factory site in Croydon.
The Fox's biscuits business, which has been one of the poorest performers for Northern in recent quarters as a result of high ingredient costs, is not part of the business being sold, and it is unclear whether Northern will seek a buyer for that unit as well.
It is certainly a poor fit with the rest of its business, bolstered recently through the acquisitions of Solway Foods and San Marco frozen pizzas, both of which are key operators in the core convenience food market.