Debt-laden Premier Foods has already got itself out of a pickle this year, now it is getting itself out of a jam with the sale of its sweet spreads and jellies business.
The brands being sold include Hartley's, Robertson's, Frank Cooper, Keiller, Gales and Sun-Pat. US firm Hain Celestial Group is paying £200m, to be satisfied through a mixture of shares (£30m) and cash (£170m), to get its hands on these long-time fixtures of the British breakfast table.
The products are predominantly manufactured at Premier's Histon factory, near Cambridge, which will also be sold to Hain Celestial as part of the agreement. All employees at the site, with the exception of a number of group employees, are expected to transfer to the buyer following an appropriate consultation process.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The sale is the third major disposal announced by Premier Foods this year and comes less than a month after the group completed the sale of its vinegar and sour pickles business, which saw the Sarson's and Hayward's brands fall into Japanese hands.
"Following completion of this sale, we will have raised around £275m of the £330m disposal proceeds that we committed to achieving by June 2014. This will represent a 22% reduction in our net debt since the half year," observed Michael Clark, Chief Executive Officer of Premier Foods.
In 2011, sales of the sweet spreads and jellies business totalled £165.0m, of which 59% were branded sales. Earnings before interest, tax, depreciation and amortisation in 2011 were £38.3m and trading profit was £36.1m. The gross assets of the business being sold were £161.0m as at 30th June 2012.
Premier is currently re-focusing its business to centre around eight 'Power Brands', including Hovis, Oxo, Sharwood and Mr Kipling.
Irwin Simon, founder, President and Chief Executive Officer of Hain Celestial sounded pleased with the transaction although he demonstrated what is, perhaps, an American definition of what constitutes healthy food.
"In order for Hain Celestial to become the largest healthy food company in the United Kingdom, we needed to expand into Ambient Grocery where we have seen health and nutrition gain traction with consumers," Simon said.
"The acquisition of the Premier Foods brands furthers our goal to expand in the United Kingdom with the addition of ambient grocery products. Key to the success will be the experienced workforce and management at the Histon facility who we look forward to working with," he added.
Premier Foods, which over-extended itself to buy Ranks Hovis McDougall in 2007, has seen its share price halve over the last year as senior figures, including the Chairman, all wiped their plates and left.
As recently as March the shares were trading at 180p, up from 32.9p in late 2011, and the stock remains one of the most volatile on the market. Reaction to the promise of jam tomorrow - the transaction is expected to complete by the end of October - was favourable, with the shares rising 0.75p to 67p in the morning session, having risen to 69.75p earlier on.
JH
