Partly Cloudy

Partly Cloudy

max temp: 22°C

min temp: 16°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

Stansted Airport, part of the Manchester Airports Group.

Independent management, design and construction consultancy Pick Everard is set to expand into the aviation sector.

Millions have been paid to passengers since 2012

There was a £900,000 increase in the amount paid to delayed passengers in just one year – from £1.4m in 2013/14 to £2.3m in 2014/15.

The new branding for Tarmac following its acquisition by CRH.

Iconic contruction brands Tarmac and Blue Circle have been combined to create a UK leader in the building materials sector.

Natasha Davies, Tom Holloway, Ollie Prescott, Rachel Wilby and Omar Khattab, the five new appointments at Cloud Media Insight.

Ipswich-based media monitoring and analysis firm Cloud Media Insight has appointed five new executives.

Anne Holt of Baker Tilly.

East Anglia’s many ports and logistics businesses are being advised to prepare for new European Union customs duty arrangements which come into force next year.

Alan Cowie, communications and events officer at the| New Anglia Growth Hub.

New Anglia Growth Hub is to host a funding workshop, bringing together five providers of business support under one roof.

The Birketts Tour de Wellbeing cycle team, from left, Matthew Potter, Ben Burt, Jolyon Berry (front) Greg Jones and Tom Shape.

Members of the employment team at regional law firm Birketts raised more than £1,000 for Breast Cancer Care by taking part in the Tour de Wellbeing virtual cycle race, held by EMCOR UK to coincide with the Tour de France.

A plane in Flybe's latest purple livery.

Regional airline Flybe has confirmed its 2015-16 winter schedule to and from Stansted.

The head office of BT, the BT Centre, in Newgate Street, central London.

Thousands of BT workers are to share in a £265million payout under share-related savings schemes which will see some employees making gains of more than £54,000.

Lloyds has added £1.4billion to its bill for compensating customers mis-sold payment protection insurance.

State-backed Lloyds Banking Group’s provision for payment protection insurance mis-selling has topped £13billion after it yesterday took another £1.4billion hit over the scandal.

Most read

Most commented

Topic pages