Partly Cloudy

Partly Cloudy

max temp: 5°C

min temp: 2°C

ESTD 1874 Search

Food & Drink: Premier Foods agrees £30m deal to create Hovis joint venture

09:04 27 January 2014

Premier Foods is to spin-off its Hovis bread brand into a joint venture with the Gores Group.

Premier Foods is to spin-off its Hovis bread brand into a joint venture with the Gores Group.

Archant

Premier Foods today unveiled a deal to spin-out its Hovis bread business as a stand-alone joint venture, in partnership with private equity company Gores Group.

shares

Gores will pay Premier £30million for a 51% controlling stake in the business, to be known as Hovis Ltd, with half of the sum being deferred and dependent on future performance.

Premier said the new set-up would mean a increase in investment in the bread business, both to improve operational efficiency and to “reinvigorate” the Hovis brand, while enabling Premier to focus its attention and resources on its grocey brands, such as Mr Kipling, OXO, Bisto and Batchelors.

“Premier Foods considers a joint venture to be the best way to maximise value in the bread business through securing new investment and retaining the opportunity to share in the expected future gains from this investment as the business continues its return to profitable growth,” the company said.

“The transaction will additionally enable the company to strengthen its position in the ambient Grocery market through focusing its full attention and resources on continuing to grow its category leading Grocery brands.”

Premier said the transaction represented an overall value for the bread business of £87.5m, including £28.7m of working capital that will be retained by Premier Foods. However, Premier and Gores have agreed to invest a combined £45m in the business in proportion to their respective holding in the form of loan notes, of which £32m will be provided on completion of the transaction.

his investment, together with external financing and cash flow from the business, will be used to fund the investment of around £200m in the business over the next five years.

“It is expected that the joint venture will also be supported by a stand-alone credit facility for its ongoing working capital requirements with effect from the completion of the transaction. Under certain circumstances,” the company said “Premier Foods can be called upon to provide up to £10m of this line.”

Premier added that it expected short-term cash benefits from the transaction, including fees, to total around £28m which it intended to invest in its core Grocery business, predominantly focused this year on improving capacity in the cake business.

The transaction is subject to approval by Premier Foods’ shareholders and obtaining relevant consent/waivers from Premier Foods’ lenders and pension scheme trustees, as well as competition approval from the European Commission. The transaction is expected to complete during the second quarter of 2014.

Gavin Darby, chief executive of Premier Foods, said: “This is exciting news for the bread business and a great deal for Premier Foods. We can now focus our attention and resources on developing our category leading Grocery brands.

“I’m delighted that we’ve found a strong partner in The Gores Group who will help provide the investment necessary to develop the bread business. This will be good for our customers, our employees and all those connected with the business.

“A joint venture arrangement also means we will share in the future gains from this investment as the business continues its return to profitable growth, helping us maximise value creation. Both parties are excited by the opportunities this transaction brings. “

Fernando Goni, managing director at the Gores Group, said: “We are excited to partner with Premier Foods to revive the Hovis brand and spearhead re-investment across the Bread business. We believe there is significant untapped potential in such a well-loved, household name and are confident in the abilities of the talented management team to drive value for all stakeholders.

“The Gores Group has a rich history of working alongside corporate partners to unlock latent value in divisions that require operational and commercial improvement and, as such, we are convinced that Hovis offers a perfect fit for our unique capabilities.”

Premier Foods, which also owns brands such as Ambrosia, Loyd Grosman and Sharwood’s, added that trading profit for the year ended December 31, would be in line with market expectations despite some “challenging” trading conditions during the year, particularly during the final quarter.

Sales for its core brands were 2.0% up over year as a whole and adjusted profit before tax was expected to be ahead of expectations for the year, reflecting a slightly lower net regular interest charge, it added.

shares

0 comments

James Cooper, centre, of Survey Solutions, with Robertt Mullins, left, and  Jeff Bate of East Anglian Land Surveys.
Photo: Paul Nixon

East Anglia’s largest independent firm of surveyors has consolidated its position with the purchase of another Suffolk-based business.

Morrisons in Stowmarket.

The Morrisons supermarket in Stowmarket will close on April 3, it has been announced.

PCA England masters players, from left,  Paul Nixon, Matthew Hoggard, Mark Ramprakash and Alistair Brown at Lord’s celebrating Greene King's new partnership with the association.
Photo: portraitcollective.com/Sam Bowle

Greene King has agreed another major cricket sponsorship deal, this time in support of the game at grassroots level.

The BT apprenticeship showcase evening

More than 200 students, parents and teachers gathered at BT Adastral Park in Martlesham for the company’s apprenticeship showcase on Wednesday.

Alastair Kerr and Philip Turner. Mr Turner's firm, the Chestnut Groupr,  is to take on the management of the White Horse Inn at Easton, near Framlingham.

A picturesque village pub is set to be relaunched under new management in May.

Most read

Fred Olsen Travel Sale

cover

Click here to view
the Fred Olsen
Travel Sale

View

Most commented

HOT JOBS

Show Job Lists

Topic pages

Streetlife

Great British Life

Great British Life
MyDate24 MyPhotos24