Associated British Foods is understood to have entered an agreement to acquire up-market cereal brand Dorset Cereals.

An industry source said that the deal – which is yet to be confirmed by the company – remains subject to regulatory approval.

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ABF is said to have agreed to pay current owner Wellness Foods GBP50m (US$83.8m) to secure the brand.

Speculation emerged at the beginning of April that Wellness could be preparing to sell the business.

While Welless did not confirm that it had put Dorset on the block, the company did reveal that it had received interest from a number of companies. ABF, Bright Food controlled Weetabix and Kellogg were touted as potential suitors for the brand. 

ABF did not immediately respond to requests for comment this morning.

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ABF has been working to improve the fortunes of its grocery business. The company started to see profits at the unit improve in the back half of last year and, in its most recent trading update, ABF booked a 100 basis point margin improvement and 3% sales rise for the first half of this year.

Commenting on the rumours, Panmure Gordon analyst Graham Jones told just-food that the Dorset Cereals brand was a good buy for the company.

“I think Dorset is a great brand, with good growth potential and will be an excellent fit with ABF’s existing Jordan’s brand. I understand sales are circa GBP40m and as such the rumoured price represents a very good price.”