UK: Premier silent on Gores investment speculation

By Katy Askew | 14 January 2014

Premier "making progress" in search for bread partner

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.

Sectors: Bakery, Mergers & acquisitions, Private label

Companies: Quorn, Premier Foods plc

View next/previous articles

Currently reading -

UK: Premier silent on Gores investment speculation

There are currently no comments on this article

Be the first to comment on this article

Related research

Premier Foods plc - SWOT, Strategy and Corporate Finance Report

Premier Foods plc - SWOT, Strategy and Corporate Finance Report, is a source of comprehensive company data and information. The report covers the company’s structure, operation, SWOT analysis, product and service offerings, detailed financials, and c...

Premier Foods plc - Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report

MarketLine's Company Mergers & Acquisitions (M&A), Partnerships & Alliances and Investments reports offer a comprehensive breakdown of the organic and inorganic growth activity undertaken by an organization to sustain its competitive advantage....

Premier Foods plc (PFD) - Financial and Strategic SWOT Analysis Review

Premier Foods plc (PFD) - Financial and Strategic SWOT Analysis Review provides you an in-depth strategic SWOT analysis of the company’s businesses and operations. The profile has been compiled by GlobalData to bring to you a clear and an unbiased vi...

Related articles

Editor's choice: the highlights on just-food this week

Sugar again grabbed the headlines after the World Health Organization revised its guidance on how much of the ingredient to consume. Elsewhere, a US retailer with over 2,400 stores could be created after Albertsons owner and private-equity firm Cerberus Capital Management struck a deal that looks set to see it buy Safeway.

On the money: Premier CEO backs brands to drive category growth

Now Premier Foods has emerged from the shadow its its debt burden with a refinancing package that includes a "landmark" deal with its pension trustees, the UK food group plans to use its stable of brands in growth categories to drive top-line expansion.

UK: Premier details refinancing plan, books 2013 profit fall

Premier Foods today (4 March) detailed how it plans to recapitalise its balance sheet as it booked a drop in full-year sales and profits this morning.

Welcome to the home of food information, insight & intelligence

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page