Premier Foods plc is to sell its under-performing Brookes Avana subsidiary to 2 Sisters Food Group for GBP30m (US$46.8m).
Own-label supplier Brookes Avana has undergone a turbulent year and has frequently been touted as a possible disposal candidate by analysts.
Brooks Avana failed to make a profit in 2010 and, in August, Premier said the division had seen profits in the first six months of 2011 fall GBP11m year-on-year. The unit had endured asset write-offs and redundancy costs after retailer Marks and Spencer awarded one of the its major contract for pies to Samworth Brothers in June.
Premier CEO Michael Clarke said the agreement to sell Brookes Avana to 2 Sisters represented an important step in streamlining the company’s portfolio.
“The sale of Brookes Avana underlines our commitment to focus the business on growing a smaller number of brands,” he said. “Brookes Avana will have a better opportunity to grow with 2 Sisters Food Group given their focus in the chilled food sector.”
Premier has had a tough 2011. The company warned in October that annual trading profit would be below expectations. A dispute with a major customer, believed to be Tesco, hit volumes and the market is watching how Premier trades during the last quarter of 2011 with particular interest. The company is also looking to refinance its debts and there are some concerns over its pension responsibility.
An acquisition of Brookes Avana will be the latest made by 2 Sisters Food Group, which acquired Northern Foods in March.
CEO Ranjit Singh said: “We are delighted to reach agreement on the proposed acquisition of Brookes Avana. The business has a strong track record in delivering high quality products for its customers and would provide a growth platform for 2 Sisters and increased product diversity to serve every eating occasion.
“This is an excellent strategic fit and, following completion, we will focus on delivering growth opportunities and enhancing the performance of the business.”
The agreement includes the sale of the two Brookes Avana sites in Newport and one in Leicester. It is intended that all of the employees will transfer with the business following appropriate discussions with them and their representatives, Premier said. The transaction is expected to be complete in early 2012.