Blog: Dean BestAre Unilever, Nestle lining up for Quorn?

Dean Best | 4 October 2010

Another mention for Unilever in the food M&A merry-go-round. Today (4 October), leading industry analyst Martin Deboo linked the consumer goods giant to Quorn, the meat-free business that looks to be up for sale at Premier Foods plc.

After Premier, the UK's largest food maker, confirmed it had received approaches for its meat-free division, which includes Quorn and another 'veggie' brand Cauldron, leading industry analyst Martin Deboo discussed the prospects of a deal.

Deboo, an analyst at Investec, said meat-free was probably the one Premier business that could attract the likes of Unilever and Nestle.

For Deboo, the food giants' "attendant deep pockets and ability to transact quickly" would be a benefit Premier, which is facing pressure to sell off assets to pay down debts, which after the first half of its fiscal year, stood at almost GBP1.4bn (US$2.2bn).

Premier's shares jumped today on the back of the interest in Quorn and closed up 10.4%.

Deboo estimates that Premier's meat-free division has sales of GBP130m and EBITDA of GBP20-25m. Reports have speculated that Premier could get GBP200-250m for the business - a price tag that Deboo describes as an "in-the-ball-park estimate" as it implies a deal worth 8-10x EBITDA.

The analyst said a deal on those kind of terms would be "sensible" for Premier but he then indicated the kind of pressure the company is under to bolster its balance sheet.

"We think that, for Premier, earnings accretion/dilution is an academic issue and the name of the game is de-leveraging, as rapidly as possible, without compromising the underlying cash-generating ability of the remaining business," Deboo said.

Premier's next trading update is on 28 October. We could find out more about whether it has secured a buyer for Quorn - or decided to offload other assets - then.


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