Real Good Food PLC (LON:RGD) has acquired a controlling stake in Welsh healthy snack bar maker Brighter Foods.
The Aim-listed food ingredients business will pay up to £9mln for an 84.33% interest in Brighter Foods, which is based in Tywyn, Gwynedd, in mid-Wales.
Real Good Food will pay in two chunks, with half of the money paid on completion on the deal and the remainder becoming due upon finalisation of the company's 2017/18 audited accounts.
The acquisition is expected to immediately enhance Real Good Food's earnings.
The senior management of Brighter Foods will retain a 15.67% stake in the business, which will continue to operate under the leadership of founder Robin Williams.
“I'll be staying as CEO and together we have already agreed a headline plan to continue growing our manufacturing facilities in Tywyn. This is great news for the town and its people,” Williams said.
Pieter Totté, executive chairman of Real Good Food, added: "Brighter Foods fits well into our strategy to consolidate profitable well run businesses in niche areas of the food manufacturing industry”.
“Real Good Food investment will enable Brighter Foods to expand and improve its capacity and product range even further,” Totté added.
House broker finnCap responded to news of the acquisition by upgrading its forecast of headline profit before tax for the current financial year by 71% to £6.4mln.
The broker is predicting profit before tax for the financial year just ended of £2.5mln.
It thinks the acquisition represents “compelling value” at 3.4 times last year's underlying earnings (EBITDA) for the initial stake and 6.5 times EBITDA for the whole kit and caboodle.
From a strategic point of view, the deal fits into Real Good Food's desire for acquiring highly profitable, bolt-on, cash-generative food producers in niche 'on trend' and growing sectors.
“Opportunities exist to expand Brighter’s capacity, range and customer base using RGD’s local and export distribution channels. Raw material buying leverage and expertise will be improved through Garrett’s and Brighter gives RGD volume in new areas,” Tejwani noted.
“The CEO, Robin Williams, brings 15 years of experience in Snacks through Halo Foods and Glisten and will remain in situ for at least four years post completion,” Tejwani said.
Its price target moved up from 47p to 75p.
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