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January 24, 2011

UK: Premier Foods sells meat-free division to private-equity firm Exponent

Premier Foods plc, the UK's largest food maker, has sold its meat-free business to Exponent Private Equity for GBP205m (US$328m).

Premier Foods plc, the UK’s largest food maker, has sold its meat-free business to Exponent Private Equity for GBP205m (US$328m).

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The move, announced this morning (24 January), follows months of speculation over the future of the business, which includes the Quorn and Cauldron brand. In October, Premier said it had received bids for the division and last month revealed it was in “advanced” talks with two potential suitors.

The deal announced today, Premier said, represents a multiple of 10.6 times EBITDA and represents “a large step” in the group’s financial strategy to reduce debt, which for the six months until 26 June, stood at GBP1.37bn.

The firm added that the sale will also allow it to “focus more resources and management time” on its grocery and Hovis businesses.

“We are pleased to have concluded this sale agreement,” said Premier CEO Robert Schofield. “It makes a significant contribution to reducing our debt. Having also recently completed the restructuring of our swaps portfolio, this deal represents another step along the road to achieving a capital structure which we believe will be more attractive to investors. It will also enable the business to focus further on building our current portfolio of great British brands.”

Chris Graham, founding partner of Exponent, said that the private-equity firm would look to invest in the business to grow it in the UK and abroad. The meat-free business is expected to report EBITDA for the year to 31 December 2010 of GBP19.3m.

“We are pleased to be acquiring Quorn and Cauldron which are strong and robust brands with a loyal customer base. It fits well within Exponent’s portfolio which focuses on prominent and distinctive businesses and includes companies such as The Trainline.com, Dreams and The Ambassador Theatre Group.”

Premier acquired the meat-free business through the acquisitions of Marlow Foods, which included the Quorn brand, and Cauldron Foods in 2005. The business has three manufacturing sites in the UK and employs around 595 people.

Under Exponent’s ownership, the management team will continue to be led by Kevin Brennan, who will be CEO of the new business. He will be supported by Clive Sharpe as chairman.

The disposal is conditional upon lender and shareholder consent, and is expected to be completed in early March.

Premier’s share price rose 1.6% to 22.71p at 9:42 BST this morning.

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Meat alternatives continue to push boundaries, as companies explore 3D printed, plant-based, and precision fermentation-based alternatives. As a result, shoppers are more open to experimental formulations that introduce new flavors to meat products, blur traditional food categories, or swap in new ingredient types. It is vital for their development that retailers acknowledge this range of emerging trends during these increasingly uncertain times. Brands must continue to understand how consumer needs and desires change, and offer a range of products that reflect the world around them, therefore developing purchasing and consumption decisions. Exciting non-traditional formulations are hitting the market - following the trajectories and target audiences of these launches will help other brands find their niche. Consult our report on Meat and Meat Alternatives, from the collection of >17,000 reports on GlobalData Explorer, to:  
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  • Understand the key themes in the market that these companies and their respective products appear to be targeting
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  • Other segment-specific analysis (packaging, design, flavors etc.)
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