Broker snap: Panmure welcomes AB Foods' latest bolt-on

6th Jul 2012 11:30

Panmure Gordon believes that Elephant Atta is a perfect fit for Associated British Foods and has maintained its 'buy' recommendation and 1,300p target price on the FTSE 100 food, ingredients and retail firm.AB Foods announced on Friday morning that it is to buy ethnic flour brand Elephant Atta from Premier Foods for a cash consideration of £34m. Panmure said that the price equates to just 1.9 times sales of £17.8m and 5.3 times EBITDA (earnings before tax, depreciation and amortisation) of £6.4m, "which in our view is an excellent price given ABF should also be able to achieve some synergies when it transfers production to its Tilbury site once it has received regulatory clearance"."In our view this looks a small, but perfectly formed, acquisition for ABF. It is acquiring the UK's leading brand of ethnic flour, an ideal fit with its Westmill Foods business, which is the leading supplier of ethnic foods to ethnic retailers and wholesalers."The group is to report its third-quarter trading statement on Thursday July 12th, in which Panmure expects the ton to remain unchanged - "strong earnings growth expected to be delivered for the year to September, driven by particularly impress growth in the Sugar division."Shares were trading 0.7% higher at 1,293p in mid-morning trade.BC