Aga turns heat up for Special Sits Fund

With investments in Clapham House, operators of the Gourmet Burger Kitchen, Dominos Pizza and Restaurant Group, operators of the 'Frankies & Benny's' and 'Chiquitos' brands, Luke Newman, manager of F&C Special Situations fund has diversified his exposure to the food industry with investments in a new holding Aga Foodservices.

"I had been watching Aga Foodservices closely for several years but had not invested in them until last week following the announcement that the company was considering the future of its commercial food services business," said Newman.

Aga Foodservices comprises a consumer business which includes the eponymous Aga cookers and the acquired high-end tiling and home design specialists Fired Earth; and a food services business which supplies commercial markets with cooking, refrigeration and baking equipment.

"The food services business competes in a more crowded market and is less profitable than the consumer arm of the company. Having witnessed private equity interest in this area of the market in the past, a sale is looking increasingly likely and I would expect the company to achieve an attractive price. This in turn, would leave the consumer business looking very attractive on a valuation basis and inefficient in terms of its capital structure and under geared balance sheet. In any case, the company looks anomalous against its sector and having bought in at 415p last week, I feel confident the share price will rise as the value in the consumer business is recognised by investors," concluded Newman.