UK: Premier to sell Branston pickle to Mizkan
Mizkan is set to buy Branston in GBP92.5m deal
The UK food manufacturer has agreed to sell its sweet pickles and table sauces to Mizkan for GBP92.5m. The deal includes Branston sweet pickle, ketchup, relish, salad cream and mayonnaise, as well as Premier's factory in Bury St Edmunds.
The sale is the second transaction between Premier and Mizkan in four months. In June, Premier sold its vinegar and sour pickles business, including the Sarson's and Haywards brands, to Mizkan for GBP41m (US$65.8m). Last month, Mizkan agreed to sell its own production facility in the UK town of Burntwood to meet anti-trust concerns about the deal.
Premier's sale of the Branston-led business is just the latest in a series of disposals the company has made to reduce its debts and focus on a select group of so-called "power brands".
CEO Michael Clarke said the sweet pickles sale meant Premier had exceeded a target of bringing in GBP330m from disposals by June 2014. The latest agreement with Mizkan means Premier, once the deal is completed, will have generated around GBP370m.
"We can now focus our attention on driving further momentum in our grocery business and unlocking value in bread," Clarke said.
Last week, reports claimed Premier has hired Goldman Sachs to look into the sale of its bread division, which includes one of its power brands in Hovis. Premier refused to comment.
For immediate release
Premier Foods plc
30 October 2012
Premier Foods plc (“the Company”)
PREMIER FOODS ANNOUNCES CONDITIONAL SALE OF SWEET PICKLES AND TABLE SAUCES BUSINESS TO THE MIZKAN GROUP (“MIZKAN”) FOR £92.5 MILLION
· Bank Agreed Disposal Target Significantly Exceeded Leading to 30% Reduction in Net Debt since 30 June 2012
Premier Foods today announces it has entered into a conditional agreement to sell its sweet pickles and table sauces business (the “Disposal”) to Mizkan, for a cash consideration of £92.5 million, subject to approval by Premier Foods’ shareholders and consent from its banking syndicate. Once the Disposal is completed, the Company will have delivered around £370 million in disposal proceeds since March 2012, significantly exceeding the £330 million target it committed to achieve by June 2014 as part of its new financing arrangements. This will represent a reduction of approximately 30% in the Company’s net debt since the position reported at the Half Year1.
The Disposal includes Branston sweet pickle, ketchup, relish, salad cream and mayonnaise, together with the Company’s Bury St Edmunds factory in Suffolk. Completion of the Disposal is expected to take place early in 2013 and all employees at the site are expected to transfer to Mizkan following an appropriate consultation process.
Following completion of the Disposal, the branded sales mix of the Company’s Grocery business will increase to approximately 90%.
Michael Clarke, Chief Executive Officer of Premier Foods, said:
“I’m delighted to have exceeded our disposal target 20 months early while at the same time delivering three successive quarters of sales growth and taking £40 million of overhead costs out of the business this year. We can now focus our attention on driving further momentum in our Grocery business and unlocking value in Bread”
“Our disposals since March have achieved a healthy average EV/EBITDA multiple of 8.9x based on current year trading and expected overhead cost reductions. This is a good result in the current market.”
Kazuhide Matazaemon Nakano VIII, Chief Executive Officer, Mizkan, commented:
“Branston Sweet Pickle is an iconic brand that has established a market leading position. The Branston brand is also an excellent strategic fit with our global portfolio and adds to our solid foundation for growth in the UK.”
· The transaction includes the production, distribution, sales, marketing and licensing of the Branston brand, a significant private label business and the Bury St. Edmunds site.
· Consideration of £92.5 million is payable in cash on completion of the Disposal and is subject to an adjustment for the value of inventory transferred at completion.
· The proceeds of the Disposal will be used to pay down debt.
· Premier Foods and Mizkan have entered into a co-packing agreement pursuant to which Mizkan will continue to manufacture certain cooking sauces and other products at the Bury St Edmunds site for the next 15 years.
· Premier Foods and Mizkan have entered into transitional services arrangements to facilitate the smooth transfer of the business.
· The Disposal is conditional on the approval of the Company’s shareholders and consent from its banking syndicate, and is expected to complete early in 2013.
For the financial year ended 31 December 2011, sales2 of the sweet pickles and table sauces business were £66.0 million, of which 54% were branded sales. EBITDA3 for the year ended 31 December 2011 was £11.7 million and Trading Profit4 was £8.5 million. The gross assets of the business being sold were £81.8 million as at 30 June 2012. As previously announced, to help mitigate the impact on the Company of this and other transactions announced this year, the Company expects to deliver further overhead cost reductions of £20 million in 2013, over and above the £40 million of savings that will be achieved by the end of 2012.
A circular will be sent to shareholders in due course giving details of the Disposal and containing a notice of a general meeting at which a resolution to approve the Disposal will be proposed.
Original source: Premier Foods
- Interview: Mondelez eyes sweet success in China
- The benefits of engaging staff in sustainability
- How food companies involve staff in sustainability
- Why Danone is withdrawing Dumex from Vietnam
- How PepsiCo is taking action on palm oil
- 2 Sisters chief Boparan buys Bernard Matthews
- Fonterra says value-added strategy paying off
- B&G Foods acquires ABF's US spice business
- General Mills profit falls as sales disappoint
- MP calls for probe into Bernard Matthews "sale"
- The Big 15: Strategies and Priorities of Top Packaged Food Players in Comparison
- Global Chocolate Confectionery Overview: Challenges, Opportunities and Risks
- Global Foodservice Market 2016-2020
- Global Food and Drinks Closures: Performance and Opportunities
- Fast Food Restaurants in the US - Industry Market Research Report