UK: Premier silent on talk of Hovis "auction"

By Dean Best | 26 October 2012

It is unclear who could buy Hovis, City sources say

It is unclear who could buy Hovis, City sources say

Premier Foods plc has refused to be drawn on reports it has hired Goldman Sachs to talk to potential suitors for its bread business.

Sky News and The Times reported the UK food maker had asked the investment bank to sound out whether there is an interest in acquiring the unit, which includes the Hovis brand.

The reports came days after Premier announced it would restructure and "unlock value" from its bread business, although CEO Michael Clarke was coy about the plans.

"We have spent a lot of time on working through different business models, what parts of the business are essential. I don't want to get into more detail than the generics that I am using in this conversation. We have worked out what are our preferred solutions," Clarke told City analysts.

The comments followed Premier's announcement of the end of a GBP75m contract to supply own-label bread to an unnamed retailer, which was yesterday revealed to be The Co-operative Group. Clarke said the decision was part of moves to build "sustainable profitability in bread".

The announcement of the end of the contract came alongside Premier's trading update for the third quarter. It said Hovis' sales and market share of Hovis bread increased in a "highly competitive" category.

However, it warned increased wheat costs had affected the business and said it would review how it bought wheat.

In 2011, Premier saw sales and profits from its bread business fall amid high levels of promotional activity.

Shares in Premier were up 2.85% today in the wake of the reports on Goldman. However, City sources believe there are no obvious buyers of Premier's bread division. Rivals Associated British Foods and Warburtons would likely face anti-trust obstacles.

Sectors: Bakery, Mergers & acquisitions, Private label

Companies: Premier Foods plc, The Co-operative Group, Associated British Foods, Warburtons

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