Kraft Foods to acquire unit of United Biscuits

Kraft Foods Inc., the world's second-largest food company, has paid $ 1.1 billion to acquire a unit of Britain's United Biscuits (UB), the Wall Street Journal, citing people familiar with the deal, reported late Sunday.

The report said the Ill., US based Kraft had signed the deal over the weekend for UB's southern European arm. It also reported that the mostly non-cash transaction would be valued at nearly $ 1.1 billion, including Kraft's assumption of some debt and the return of its 25% stake in United Biscuits back to the company. However, more financial details couldn't be learned.

Private equity groups Cinven and MidOcean Partners each have a 30 % stake in UB, while PAI Partners has 15%. Kraft owns the other 25%.

The American group Kraft, manufacturer of Ritz crackers and Toblerone chocolate, may announce the deal as early as Monday, the report said, adding that the acquisition would include control of brands like Triunfo cookies in Portugal and HobNobs in Spain. In Spain, the UK group already owns seven of the top 10 selling biscuit brands. The deal would also let Kraft to regain control of brands like Ritz in Europe.

The privately held UB, which is Britain's biggest biscuit maker and the second largest in Europe after France's Danone, also commands a near 40% share of the Portuguese market. UB's southern European business already makes Kraft's Oreo cookies under license.

On the other hand, Kraft, the maker of Oscar Mayer, Nabisco and DiGiorno products has been fighting a curb in recent years in an industry marked by its slow sales gains and skinny profit margins. Kraft, actually known for its coffee, cheese and cereal products, has been struggling to keep its branded products on grocery-store shelves that swiftly have become stocked with private-label brands. At the same time, prices on commodities, major ingredients to food companies' fortunes, have soared.

The company is in the midst of a second stage of a sweeping restructuring, on track to remove up to 8,000 positions and shutter nearly 20 plants in the next two years. Through current year, the company has announced 5,500 layoffs and 19 plant closings.

However, UB's four private owners, who appointed Goldman Sachs in February to conduct a "strategic review" of the business, would begin a new process to sell the northern European division once Kraft completes the purchase.