Greggs buys Baker's Oven

Newcastle-based manufacturer and retailer of bread, confectionery, and

savoury proucts, is paying #19m cash for the business.

Greggs is buying 424 retail bakers' shops, two main bakeries and

certain related assets. In addition, Gregg's will purchase stocks and

receive a cash allowance for certain liabilities, primarily related to

employees, which it will assume.

These amounts will be calculated at the time the deal is completed and

are expected to result in a net cash payment to Greggs of about #1m.

Baker's Oven's outlets are predominately in southern England and the

Midlands, which makes them a natural fit with Greggs' existing chain of

shops. Gregg's estimates that around #6m of cash will be generated from

the Baker's Oven business in the two months following completion.

Within Baker's Oven, most of the shops' products are either supplied

by the two main bakeries or made by 169 in-store bakeries. Currently 170

shops have seated catering facilities.

Total fixed assets being acquired by Gregg's total #22.6m. In the year

to September 18, 1993, the Baker's Oven made a loss before tax and

interest and closure costs of about #650,000. This was after crediting

#350,000 of rental income from certain properties not being acquired.

However, Gregg's directors believe that the past results do not give a

meaningful guide as to the likely trading performance of the business

being acquired.

This assumption is based on the fact that in recent years as a result

of shop closures, the trading loss has steadily fallen.

In March 1990, there were 628 shops and four main bakeries. By the end

of the last financial year this had been reduced to 496 shops and two

main bakeries. This process has continued with the closure or planned

closure of another 72 shops since the year-end.

Rationalisation and cost reductions have resulted in a continuous

improvement in the operating performance of the business. In the 24

weeks to March 5, 1994, the operating loss was said to be significantly

below that for the comparable period last year.

In addition, some central overheads allocated from ABF will no longer

be necessary and will result in savings of around #750,000.

Commenting on the acquisition, Michael Darrington, Greggs' managing

director said it provided ''a unique opportunity for Greggs to expand in

its key target areas and to extend its operations into in-store bakeries

and seated catering.''

In terms of current trading Greggs' profit is said to be ahead of the

comparable period last year.

In a falling stockmarket Greggs' shares gained 12p to 805p while ABF

dropped 12p to 543p.