Confirmed: Kraft buys Spanish UB unit

Following reports last month that US-based Kraft Foods was to bid around £570m for a controlling share of UB's southern European biscuit business, sources close to the deal have reportedly confirmed the sale.

Through the acquisition Kraft, maker of Dairy Lee cheese and Ritz crackers, now owns seven of the top 10 selling biscuit brands in Spain and holds a 39 per cent share of the Portugese biscuit market with the Truinfo brand.

Kraft, the world's second largest food producer, has owned a 25 per cent stake in UB's Spanish division for six years, but for some time has been looking to take full control of the business that already manufactures its flagship Oreo brand under license.

Earlier this year UB, currently Britain's leading biscuit manufacturer, asked Goldman Sachs to perform a strategic review of the company in a bid to streamline the firm and focus on key markets and consumer trends.

Following completion of the Spanish unit sale, UB's northern European business looks likely to go under the hammer, with UK's Premier Foods coupling with a Dutch equity firm to make a bid.

In April UB announced a year-end profit jump to £204m - up from 2004's £163m. This was bolstered by contributions from newly-acquired snack brands Jacobs and Truinfo.

Now 88 per cent of United Biscuit's portfolio is branded.

Total key brand revenue rose by two per cent last year, reflecting the company's continuing focus on marketing and innovation of priority products.

The firm is using these household names to capture the trend for healthy eating by introducing lighter alternatives for core brands, such as Rich Tea Lights and Jacob's Lights.

Over the past year the manufacturer has introduced new nutritional labelling to appeal to consumer concerns, courting FSA recommendations for improved product information.

This change in focus, coupled with cost savings through 2005 led to a 2.7 per cent improvement in business profit margins, claims the company.