Big Food Group linked to buy out?

Talks are rumoured to have taken place between the management of the UK's Big Food Group and potential investors, but ongoing concerns about its Iceland supermarket unit may yet scupper any chance of a buyout.

Big Food Group, the food retailing group which operates the Iceland chain of supermarkets, is alleged to be in talks with two private equity firms in the US with a view to financing a management buyout of the beleaguered firm.

A report in the Wall Street Journal claims that the company's management has held informal talks with at least two potential investors - Kohlberg Kravis Roberts and CVC Capital Partners - although it did not say whether these discussions had advanced to a more serious level.

Iceland has been struggling to compete with the larger players in the UK market for a number of years, and although it long ago abandoned its focus on frozen food to diversify into the broader food retail sector this has not been enough to stop it haemorrhaging market share to its rivals.

The stock market too has lost confidence in the company, with its shares losing 80 per cent of their value since the start of the year, according to the paper. The group is now valued at around £134 million (€212.2m) after its shares rallied a little following the buyout rumours.

Big Food's performance has not been entirely bad - its Booker wholesale division and a foodservice supply business are both profitable - but it still remains to be seen whether these will be enough to offset the troubles at Iceland. The supermarket group posted a loss of £8 million in the first half, compared to profits of £8 million a year earlier.