'Bootiful deal' faces Sara Lee challenge

Bernard Matthews wants to take his company private, but a US food giant threatens to disrupt his plans

When the Norfolk turkey tycoon Bernard Matthews floated his "bootiful" company on the Stock Exchange in 1971, he did so because it was "the best way to get cash into my pocket against a background of extortionate income tax". Nearly 30 years on, the business has mushroomed in value from £4m to £232m and Mr Matthews has announced plans to take the group private again.

When the Norfolk turkey tycoon Bernard Matthews floated his "bootiful" company on the Stock Exchange in 1971, he did so because it was "the best way to get cash into my pocket against a background of extortionate income tax". Nearly 30 years on, the business has mushroomed in value from £4m to £232m and Mr Matthews has announced plans to take the group private again.

But his hopes could be scuppered by an unlikely predator. Sara Lee, the United States-based Wonderbra-to-cakes maker, shocked the City last night by putting out a statement after the markets had closed announcing that it was "considering whether or not to make an offer for Bernard Matthews". No additional details were given. "A further announcement will be made in due course," the group said.

A spokesman for a presumably stunned Mr Matthews said: "Obviously we've seen the announcement. We have not really got anything to say at the moment."

The Matthews family and management team, who together hold about 42 per cent of Bernard Matthews plc, had earlier said they would pay 185p-a-share to regain control of the rest of the business that they do not already own. The recommended deal represents a 57.4 per cent premium over the closing share price on 15 May, a day before the group announced that a buyout was being considered.

"Most people join the stock market to raise cash for the company," Mr Matthews explains. "But we have never had to do that. We have built the company up purely on retained profits."

He said he had seriously considered a delisting "several times over the years", but claims "the final straw" came when he was forced by the Stock Exchange to divest 100,000 shares, which he had acquired in the company as part of his options entitlement. The rule is that if an individual and their family own between 30 per cent and 50 per cent of a company, they cannot increase their holding without making an offer at the same level for all the remaining shares in the group.

Mr Matthews says: "They forced me to sell the shares, for which I got 110p. Today, I am offering to buy them at 185p ... I want the freedom."

Mr Matthews, 70, started the business when he was 20 years old. After a brief spell in the RAF's 617 "Dam Busters" squadron, he went to work for a small auctioneering company in Norfolk, where he earned £1.50 a week. "When you consider I had to pay my bus fare to Norwich, that wasn't a very princely sum," he says.

He decided to augment his income by setting up his own enterprise and, spotting the large numbers of baby chickens that were regularly sold at auction, he decided it would be a good idea to do the same thing with turkeys.

So, for £2.50, he bought 20 turkey eggs and a paraffin oil incubator to help hatch the chicks. "I didn't fancy sitting on them myself," he says.

Within weeks, he had sold the new-born birds to a neighbouring farmer for an allin profit of £6.50. He never looked back.

In 1955, as his turkey trading began to take off, Mr Matthews bought a dilapidated mansion house, Great Witchingham Hall, for £3,000. He lived at one end of the house and kept turkeys in the other. "I put electric incubators in the old banqueting hall and did all the cooking in the kitchen oven," he says.

The residence has since been converted into the company's headquarters. Mr Matthews says: "It used to be full of turkeys and now it's full of accountants ... It was better when there were the turkeys."

It is thought that controversy over Mr Matthews' living arrangements is one of the many factors that have contributed to his decision now to take his company away out of the public arena. In 1997, he bought The Warren, a five-bedroom house directly behind Great Witchingham Hall, from the company after it emerged that he had been living in rent-free accommodation for the past 40 years.

One analyst said: "There was quite a kerfuffle when all that became public. But it was totally unmerited. Bernard Matthews' shareholders have been very well rewarded for his work over the years." He added that the Matthews family's buyout offer represented: "a very fair deal for both sides".

But it remains to be seen whether the company's independent directors and shareholders will agree, or whether they could be tempted by a rival offer from Sara Lee.

A spokesman for the independent directors said they were "considering their position. They are in conversations with the company's advisers. A further announcement will be made in due course".

David Hallam, an analyst at Williams de Broe, says Mr Matthews and his business could well be better off without the hassles associated with being a public company. He says the firm has been dogged since its flotation by the short-term attitude of the City. "Their profits have occasionally fallen slightly because of expansion moves ... and the share price has led a pretty rocky ride as a result."

Even so, Sara Lee could prove a mighty opponent for Mr Matthews. With annual sales of $1.5bn (£1bn), compared to Bernard Matthews' £344.3m, it is intent on overseas expansion. Earlier this year, it completed the £160m purchase of Courtaulds Textiles, the underwear maker that supplies Marks & Spencer.

The Matthews family claims to have the support of shareholders representing 55.3 per cent of its issued share capital, including its own holding. But it was not clear yesterday how firm these acceptances were.

As for Mr Matthews, before the Sara Lee bid emerged he appeared to be fully committed to the business. He said: "If I get fed up with it, then I'll stop. But I reckon I can go on for another 50 or 60 years." It remains to be seen whether a golden handshake from Sara Lee could tempt him into an early retirement.