Acquisition

Associated British Foods PLC
22 July 2004


                      Associated British Foods plc ('ABF')

             US$1.35 billion food ingredients acquisitions for ABF

For immediate release
                                22 July 2004


Associated British Foods plc, the international food, ingredients and retail
group, has today announced the acquisition of the international yeast, bakery
ingredients and US herbs and spices businesses from Burns, Philp & Company
Limited of Australia for US$1,350m (£730m), subject to regulatory approvals.


The consideration will be paid in cash from existing resources and new
facilities at completion.  There will be a closing adjustment to account for
changes in working capital.


The combined businesses had a profit of US$129m (£70m) and sales of US$708m
(£383m) in the year ended June 2003 and net tangible assets at 30 June 2003 of
US$393m (£212m).


Highlights

  • Excellent strategic fit which complements our existing skills and
    knowledge

  • Growing worldwide business, 45 manufacturing sites in 24 countries, with
    strong presence in developing markets

  • Market leader in bakers yeast in North America, Latin America and Asia.
    Number 3 in Europe

  • Strong regional positions in bakery ingredients combine well with existing
    ABF products and technology to create major new force

  • Number 2 in US herbs and spices fits well into ABF's existing US food
    retail and foodservice infrastructure

  • Good profit growth prospects, strong cash generation and immediately
    earnings enhancing



Peter Jackson, Chief Executive, said:


'These businesses are a perfect fit for ABF.  They have a significant presence
in growing markets, strong market positions and are cash generative.  The broad
international footprint will be an excellent platform for further growth.'



For further information please contact:


Associated British Foods

Until 1500 (BST) only
Tel: [phone]
After 1500 (BST)
Tel: [phone]

Peter Jackson, Chief Executive
John Bason, Finance Director


Citigate Dewe Rogerson
Tel: [phone]
Jonathan Clare / Chris Barrie / Sara Batchelor


                           Rationale for acquisition


Strong market positions

Market leader in bakers yeast in North America, Latin America and Asia and
number 3 in Europe.

Number 2 in herbs and spices in the US.

Strong regional positions in bakery ingredients.


International coverage, exposure to growing markets

45 operations in 24 countries will significantly broaden ABF's international
footprint.  This will further strengthen ABF's presence in the fast growing
markets in Asia, especially China, and will establish a major presence in Latin
America.



The market for bakers yeast is growing at an overall 3-4%, 1-2% in developed
countries but much faster in many developing countries such as China, where the
growth rate is over 10%.  In addition the worldwide bakery ingredients market is
growing at 5% p.a. and the US herbs and spices market at 3% p.a.



Growth opportunities

Our skills and knowledge make this a logical acquisition for us.  We will
improve the underlying profit growth in bakers yeast by leveraging ABF's large
scale operating skills, use our cash to fund capital improvements and support
further geographical expansion where appropriate.



In bakery ingredients the combination of ABF's knowledge and the international
distribution capability of this business will create a powerful worldwide force.
  We will bring improved technological support to local markets and use the
distribution and infrastructure to increase the sales of our bakery ingredients
and enzymes.


The brands of the US herbs and spices business will benefit from the combination
with our ACH business which already has a significant branded retail and
foodservice operation in the US, including the recently acquired Mazola corn oil
brand.


These businesses have been managed in a devolved style and transfer with strong
existing regional management.  The requirement for transition services with
Burns Philp is very limited.


The acquisition of these businesses will further internationalise ABF and will
provide an excellent base for further scale growth.  It will reinforce our
strong cash generative qualities and continue to reduce the impact from any
modification to the EU Sugar Regime.


A presentation for analysts will take place at 9am (BST) on 22 July at ABN
AMRO's offices, 250 Bishopsgate, London EC2M 4AA.


A live webcast of the presentation will be available at www.abf.co.uk.  The
presentation will also be audible on [phone] with a telephone replay
facility on [phone], pass number 286182 for 7 days.


Please note that the Q&A section of the presentation will not be available on
the webcast or conference call.


Notes to Editors


Associated British Foods


Associated British Foods is an international food, ingredients and retail group
with annual sales of £4.9 billion and 35,000 employees.  The group is one of
Europe's largest food companies and has significant businesses in Australia,
China and the US.


The acquired businesses


An analysis of the estimated sales for the financial year ended June 2004 for
the acquired businesses is as follows:

By product:                                                                    %

  Bakers yeast                                                                40
  Consumer yeast                                                               5
  Bakery ingredients                                                          20
  Yeast extracts                                                               7
  US herbs and spices                                                         28
                                                                             100

By geography:                                                                  %

  North America                                                               48
  South America                                                               20
  Europe                                                                      15
  Asia and Australia                                                          17
                                                                             100

Yeast


Yeast is an essential non-substitutable ingredient used in the production of
bread.  Its processing involves fermentation on a carbohydrate substrate which
is normally beet or cane sugar molasses.  This business has its own parent yeast
strain bank at its technology centre in Sydney, Australia.  Strains are supplied
to the 37 yeast and extracts plants worldwide which ferment commercial
quantities.  The main market for bakers yeast is plant and artisanal bakers and
there is a smaller retail yeast market for home baking.  It is sold in two main
forms:  fresh (chilled) and dry.  Fresh is delivered locally and dry can be
exported.



The total market is 2.3 million tonnes worth US$1.5bn.  Growth is driven by
population and bread consumption. It is 1-2% p.a. in developed countries and
much higher in developing countries driven by the changes of diet which result
from increased affluence.   Three international companies have a combined market
share of over 50% with the remainder being local companies.



This business has built extensive and efficient distribution systems in its key
markets in all regions.  Its leadership is built on its sales of fresh yeast and
a share of the dry yeast export market.  The brands are widely recognised for
quality and include Mauri, Fleischmann and Calsa.



The consumer yeast brand is Fleischmann and has the majority share of the US
retail market.  The main product is dry yeast sachets which are purchased by the
consumer for home baking.



Bakery Ingredients



This business has developed using the sales and distribution capability of yeast
and benefited from the acquisition of Fleischmann in South America and Goodman
Fielder in Australia.  It has been regionally driven and has become strong in
all regions except Europe.  The main products are bread improvers, conditioners,
mixes and fats and oils.   There are six dedicated manufacturing sites and an
additional eleven sites are shared with yeast.



The Cereform operations of ABF are currently limited to the US, UK and Australia
and have focused on high value bread improvers, conditioners, concentrates and
enzymes supplied to plant bakers.



The combined business will have sales of over US$300m and have coverage of all
significant markets, unrivalled market access in developing markets, low cost
distribution through sharing of overheads with yeast and leading technology for
western style baking.



Yeast extracts



Yeast extracts are produced through the further processing of yeast.
Applications include flavourings and substrates for cultures used in
pharmaceutical production.  This business has two yeast extract plants, in
Germany and in the US, and sales are worldwide.  Alongside the Ingredients
businesses of ABF, new product development and sales effort will be
strengthened.



US herbs and spices



The US market has sales of US$2bn and is growing at 3% p.a. with the positive
drivers of growth coming from increasing demand for enhanced flavour profiles
and ethnic foods.



This business has a portfolio of brands in the spices, extracts, dry seasonings,
sauces and gravies sectors.  It sells to the retail, club and foodservice
channels.  The main brands are Tone's, Durkee and, in gourmet spices, Spice
Islands.  The retail strategy for this business was changed in the late 1990's
and profitability has increased significantly since then.  We are confident that
this strategy will be effective for the future.



Manufacturing is based at Ankeny, Iowa, in a recently built facility with high
quality, efficient operations and excellent research and development
capabilities.



This business will be merged with ABF's existing retail business in the US, ACH.
  Additional support will be given for growth in the gourmet retail segment and
the club channel and there will be benefit from ACH's expertise in foodservice
and private label and its sales and administration capabilities.



Approvals



The acquisition is subject to regulatory approvals and may require Burns, Philp
& Company Limited shareholder consent.  If such consent were to be required and
were not obtained Associated British Foods plc would be entitled to
reimbursement of expenses of up to £10m.



                      This information is provided by RNS
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