Acquisitive Finsbury Food Group is buying Yorkshire Farm Bakery and A&P Foods of Hull for £8.9 million.

Chaired by the redoubtable advertising veteran Lord Saatchi, AIM-quoted Finsbury, a leading manufacturer of premium cakes, low-fat cake slices, organic bread and similar items, has agreed to pay an initial £4.8 million to the Arnett family, which controls both companies. Yorkshire Farm makes gluten-free breads, while A&P produces gluten-free pre-mixes and Finsbury, which bought United Central Bakeries from the Arnetts in 2005, sees the acquisition as complementing its fast-growing ‘health sector’.

London-based Finsbury has set up a new trading company, Livwell, to complete the acquisition and is funding the initial payment from internal sources, an £800,000 commercial mortgage and a £4 million term loan from HSBC and an extended overdraft facility. Finsbury, which increased interim pre-tax profits 23 per cent to £1.6 million after £1 million reorganisation costs on turnover up 91 per cent to £83 million, will pay the remaining £4.1 million in half-yearly stages up to 2010.

Yorkshire Farm and A&P have forecast a doubling of combined earnings to at least £1.4 million for the year to last month on joint turnover up from £7.3 million to no less than £8.5 million. Three Arnetts are staying with the enlarged Finsbury group and one, Tony Arnett, argues the deal will enable his family’s two companies to develop their full potential.

Finsbury’s chief executive, David Brooks, claims the two businesses ‘perfectly fit our acquisition criteria’. Finsbury’s formerly star-performing shares have worse than halved since their 117.5p peak a year ago, though at 48.5p, they did this morning bounce 1.5p off their 12-month low and could make further relative progress in the medium term.

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Finsbury Food Group	AIM	£8.23m	16.00p	0.00p
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