Premier Foods has continued its M&A efforts with another deal for a UK brand.
The Sharwood’s sauces manufacturer has snapped up Merchant Gourmet, a convenient-meals business offering microwaveable pulses, grains and rice.
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It’s a deal seen in the City as similar to (even if bigger than) Premier’s moves for meal-kits firm The Spice Tailor in 2022 (its first acquisition in more than a decade) and breakfast-and-snacks business Fuel10K a year later.
Both those transactions have been viewed by analysts as a success and Premier’s latest move has been received positively. “The acquisition of Merchant Gourmet reflects the acquisition of a brand in high growth, that is well suited to [Premier’s] branded growth model, at a very attractive multiple,” Berenberg’s Matt Abraham said last week.
Over at RBC Capital Markets, James Edwardes Jones said the move for Merchant Gourmet is “strategically sensible”, though he adds: “The price paid seems high – an enterprise value of £48m ($64.7m) amounts to 1.7 times prospective revenues to a high-single-digit EV/EBITDA multiple for 2025, post expected synergies.”
He added: “The plan seems to be to follow the template of the Spice Tailor and Fuel10K acquisitions, expanding retail distribution, launching new products and investing behind the brand.”
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By GlobalDataSpot on. Moreover, Premier’s latest piece of M&A is above all, like the Fuel10K deal, a move to give the Mr Kipling cakes maker more exposure to the healthier parts of the store.
There’s no question Premier’s so-called “branded growth model” has paid off for the Ambrosia and Bisto maker in recent years.
It’s a long time since Premier was derided in the UK investment community as something of a “zombie” company weighed down by debt and a pension deficit and therefore unable to invest enough in its brands.
The group has enjoyed four consecutive financial years of rising revenue and profits. Premier’s headline revenue (which excludes exchange rates and its exits from frozen pizza and powdered desserts and drinks) grew 3.5% in the year to 29 March to £1.15bn. Premier said its headline branded revenue increased more than 5% to just over £1bn.
The UK remains the bulk of the business. Premier’s stated “five-pillar strategy” has “continue to grow the UK business” at the top of the list. UK branded sales were up more than 4% in the company’s last financial year.
However, Premier has also been able to regularly invest in growing its business outside the UK to the extent it has doubled in size over the last five years.
“Premier has more than shown, to date, the reward of its branded growth model across its portfolio,” Shore Capital analyst Clive Black says.
The Homepride manufacturer is in the second quarter of its 2025/26 financial year. In July, the company issued a trading update on its first quarter, which ran to 28 June.
Sales growth slowed, inching up 0.3% on a constant-currency basis amid “strong comparatives”. Branded sales grew 1.2%, although Premier pointed to “further market share gains”.
“We expect branded revenue growth to build through the year, as we launch further new products,” CEO Alex Whitehouse told investors. Premier’s NPD programme includes yogurt and granola pots under the Fuel10K brand, a sign of its willingness to invest in acquired assets.
Premier’s five “pillars” also include a strategy to expand into new categories in the UK and keeping an eye on M&A targets will prove a useful lever to support the company’s top line in a challenging domestic market.
“Replicating the success of our previous two acquisitions, The Spice Tailor and Fuel10K, we will be deploying our proven branded growth model: expanding retailer distribution; accelerating new product development; and increasing marketing investment to unlock further profitable growth for the brand,” Whitehouse said last week.
Premier expects the deal to be “accretive” to its earnings in the first full year of ownership, with the transaction expected to be completed by Monday.
The company said the price tag “implies a high-single-digit EV/EBITDA multiple” after expected synergies.
Berenberg’s Abraham said: “The transaction is to be completed at 1.7x EV/sales, which positions it favourably relative to peers. High-growth brands typically transact at greater than 2x EV/sales (and frequently higher than three times), which highlights the attractiveness of the multiple paid by Premier for a brand with double-digit growth.”
