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Premier Foods plc (LSE:PFD) announced Friday it is selling its vinegar and sour pickles business to Japanese firm Mizkan Group, as part of the company’s strategy of disposing non-core businesses to focus on its eight “power brands”.
The deal, which is expected to be completed in July 2012, includes the divestment of production, distribution, sales, and marketing of Premier Foods’ top vinegar and sour pickles brands, including Sarson’s, Haywards, and Dufrais, for a cash consideration of £41 million.
“We are excited to acquire two strong and iconic brands that have such a deep heritage in the UK,” said Kazuhide Matazaemon Nakano VIII, Chief Executive Officer of Mizkan Group, referring to Sarson’s and Haywards brands.
“Sarson’s and Haywards are beloved by consumers and we look forward to investing in the brands and adding to their legacy. They fit well with our global portfolio, are an excellent strategic fit and provide a solid foundation for growth in the UK.”
Pay Down Debt
The proceeds of the sale, which will be on a cash and debt free basis, will be used by Premier Foods to “pay down debt”, standing at nearly £995 million as of 31st December 2011.
Premier Foods suffered a loss after tax of £230 million from its continued operations in 2011, compared to a small profit of £4.1 million the year before.
Reported revenue of the vinegar and sour pickles business being disposed was at £34 million, representing only about 1.7% of the total revenue earned by Premier Foods in 2011, at £1.999 billion.
In its 2011 financial report submitted in March 2012, the company was able to negotiate a refinancing package totalling £1.4 billion extended through 2016 to aid the company’s restructuring programme.
Premier Foods had divested a total of more than £417 million worth of businesses in 2011, including canned grocery operations, Meat-free, and Brookes Avana, which enabled the company to lower its debt from more than £1.4 billion in 2010.
The company’s current thrust is to invest on its eight power brands, namely Hovis, Ambrosia, Mr. Kipling, Sharwood’s, Loyd Grossman, Bisto, Oxo, and Batchelors, which can only be done if the company divests its “selected, non-core businesses”.
CEO Comments
Michael Clarke, Chief Executive Officer of Premier Foods, commenting on the sale, said:
“This agreement represents another important step in our strategy to focus on our Power Brands. I’m delighted that we have found a buyer such as Mizkan. Our vinegars and sour pickles business and employees will greatly benefit from being part of a global player focused on vinegar and liquid condiments.”
Company Spotlight
Premier Foods is the largest branded food producer in the United Kingdom, supplying retail, wholesale, foodservice, and other customers with more than 35 branded grocery and bread products.
The company became public on 4th May 2012, listed on the main market of the London Stock Exchange. Shares were up 10.6% to 88.50 pence at 11:30 GMT, following the announcement.
