Dean Best

Premier's latest sale cheers City

By: Dean Best - 30 October 2012 16:11

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Premier Foods' latest deal to dispose of a household brand - this time Branston pickle - sent the UK firm's shares soaring today (30 October).

The company announced a GBP93m (US$149.5m) deal with Japanese food group Mizkan - to which it had sold another set of assets, including the Haywards pickled onion brand, earlier this year.

The transaction, which Premier expects to finalise early next year, is the latest the company has completed in the last 18 months or more as it lowers its debt pile and focuses on a select group of brands.

Premier CEO Michael Clarke said the sale would mean it exceeds its target of bringing in GBP330m in proceeds from disposals 20 months before a June 2014 deadline it signed up to under its financing agreements.

Shares in the company, which owns brands including Batchelors soup and Oxo gravy, jumped after the news and were up 6.65% at 108.25p.

Panmure Gordon analyst Graham Jones took a considered view of the sale and of Premier's financial position.

Jones said the deal was worth 1.4x Branston's sales and represented a 7.9x EV/EBITDA multiple for 2011, which, he said, was a "reasonable price" and a "better multiple than previous disposals".

However, he added: "Even after these recent disposals, Premier will remain highly geared and it still has a very large pension deficit which has to be serviced from a smaller cash generative base. For now we stick with our 'hold' recommendation and 90p price target."

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