UK: Premier silent on Gores investment speculation
Premier "making progress" in search for bread partner
Premier Foods plc has declined to comment on a report it is in talks with the investment vehicle of US billionaire Alec Gores over possible investment in its bread business.
According to The Sunday Times, US private-equity firm Gores has taken pole position as would-be investors vie to take a stake in Premier's bread arm, which includes the Hovis brand. According to the report, Gores is "closing in on a deal to take control of Hovis".
Sun European Partners, a turnaround specialist, and PAI Partners are also thought to have thrown their hat into the ring.
Premier confirmed in November it is seeking alternate sources of funding for its struggling bread business. The company has engaged the services of a financial advisory firm, Ondra Partners, as it looks at "developing investment options" for the bread unit.
The options could potentially include co-investment from a partner, the company confirmed.
The highly-leveraged Hovis maker has embarked on a period of restructuring in order to address its balance sheet issues. The company has disposed of a swathe of non-core assets in recent years, including meat-free brand Quorn and Branston pickle, in a bid to pay down debt as part of agreements to restructure its loan covenants.
To lower costs, the company has cut SKUs and consolidated its supplier base from around 3,000 suppliers to 1,500. Premier is targeting cost-savings of GBP30m (US$48.2m).
Premier's bread business has proven particularly problematic, with sales coming under increasing pressure in a relatively promotional UK bread market. In its most recent quarterly update, Premier said its bread unit saw sales dip 1.5%.
The company has been restructuring the division in a bid to boost profitability and in 2012 Premier said it would cut 900 jobs, close over 100 distribution routes and revamp its logistics operation. Premier closed bakeries in Greenford and Birmingham as well as its Glasgow mill in 2013.
The company is now seeking fresh investment to further propel improvements in bread.
The prospect that Premier could be nearing a deal that would reduce its exposure to the low margin bread business was welcomed by analysts at Shore Capital.
"We continue to see merit in Premier Foods reducing its exposure to the low margin and at times struggling Hovis, whilst with new partners could potentially re-energise the bread operation. In due course we do not rule out the possibility of Premier de-merging, spinning off or selling Hovis to shareholder benefit, although over-coming the substantial pension responsibilities should not be under-estimated," they wrote in an investor note.
However, Shore Capital added that they "continue to await" more far-reaching refinancing moves, such as a possible rights issue. "We believe that a refinanced Premier Foods, with lower and less costly ongoing debt, embracing a more manageable banking structure, to be highly desirable for its share price."
Late last year, Premier played down speculation it could be preparing a rights issue for the beginning of 2014.
"The group's bank debt and revolving credit facilities are in place until mid-2016. As previously stated in the group's half-year results in July 2013, the board continues to review the full range of options available to the Group regarding its future capital structure. The group confirms that this review is ongoing and, while it includes the possibility of a rights issue, no decisions have been made at this stage," the company said in a statement to the London stock exchange.
Euromonitor International Local Company Profiles are a concise set of briefings detailing the strategic direction taken by a company. Discover key contact details, the company background and their com...
Bread & Rolls in the United Kingdom industry profile provides top-line qualitative and quantitative summary information including: market share, market size (value and volume 2009-13, and forecast to ...
Owing to the rise in living standards, rising health awareness, outbreak of animal disease, and ethics, that is, not to kill the animals or the concern towards the animals are driving the people to be...
The report provides a review of the latest news and key events in the global savory & deli foods market during September 2014....
- just-food's pick: Innovation on show at ISM 2016
- Mondelez results and outlook - 7 things to learn
- Can dairy-free Flora lift Unilever spreads sales?
- Richelieu Foods CEO eyes growth - interview
- Foodservice focus: McDonald's/Five Guys/Starbucks
- Chobani targets growth after rejecting offers
- Mars to cut artificial colours from global foods
- Private-equity firm HKW acquires Panos Brands
- Arla eyes job cuts as part of 2020 growth push
- WWF launches food security platform