FDBusiness.com

Premier Foods Forms Joint Venture For Bread Business

 Breaking News
  • Sysco Grows European Business Sysco Corporation is to acquire Kent Frozen Foods, a successful UK-based food service distributor with revenue in the year ended 31st December 2016 of £47 million. The acquisition, which is conditional upon approval from the Competition and Markets Authority, will see Kent Frozen Foods join Sysco’s other UK businesses, including Brakes, Fresh Direct and M&J [...]...
  • Nestlé Nominates Three New Independent Directors to its Board Nestlé has announced that it proposes Pablo Isla, Chief Executive Officer of Inditex; Kasper Rorsted, Chief Executive Officer of adidas; and Kimberly A. Ross, former Chief Financial Officer of Baker Hughes, for election to its Board of Directors. The elections will take place at the company’s Annual General Meeting on April 12, 2018. At that time, three current directors, [...]...
  • Increased Funding For Promoting Europe’s Agricultural Products The European Commission has launched the calls for proposals for programmes to promote European agricultural products throughout the world and within the EU. A total of €169 million is available to co-finance the programmes, up from €142 million in 2017. Programmes can cover a wide range of issues from general campaigns on healthy eating to [...]...
  • The Coca-Cola Company Announces New Global Vision to Help Create a World Without Waste The Coca-Cola Company has announced that it is fundamentally reshaping its approach to packaging, with a global goal to help collect and recycle the equivalent of 100% of its packaging by 2030. This goal is the centerpiece of the Company’s new packaging vision for a World Without Waste, which the Coca-Cola system intends to back with a multi-year investment that [...]...
  • Partnership that Mitigates Cross Contamination Fits Like a Glove Two world leaders in their respective fields have combined their expertise to create Europe’s first bona fide antimicrobial nitrile gloves. Unigloves new Fortified single use gloves incorporate silver ion technology from BioCote®, which has been scientifically proven to destroy 90% of bacteria within just 15 minutes and 99.5% in only two hours – BioCote is also proven effective [...]...

Premier Foods Forms Joint Venture For Bread Business

Premier Foods Forms Joint Venture For Bread Business
January 27
14:20 2014

Premier Foods has reached a conditional agreement with The Gores Group to operate its Bread business as a stand-alone joint venture, which will trade under the name of Hovis. The new arrangement will facilitate a significant increase in investment in the business both to improve the efficiency of its operational infrastructure and to reinvigorate the Hovis brand, building on its strong heritage.

The Gores Group will pay £30 million for a 51% controlling stake in the joint venture, of which £15 million is deferred and contingent on future business performance. As a result, the transaction values the Bread business at an enterprise value of £87.5 million, including £28.7 million of working capital that will be retained by Premier Foods. Premier Foods and The Gores Group have further agreed to invest a combined £45 million in the business in proportion to their respective holding in the form of loan notes, of which £32 million will be provided on completion of the transaction.

This investment, together with external financing and cash flow from the business, will be used to fund the joint venture’s plan to invest approximately £200 million in the business over the next five years to improve its operational infrastructure and reinvigorate the Hovis brand. It is expected that the joint venture will also be supported by a stand-alone credit facility for its ongoing working capital requirements with effect from the completion of the transaction. Under certain circumstances, Premier Foods can be called upon to provide up to £10 million of this line.

Premier Foods considers a joint venture to be the best way to maximise value in the Bread business through securing new investment and retaining the opportunity to share in the expected future gains from this investment as the business continues its return to profitable growth. The transaction will additionally enable the company to strengthen its position in the UK ambient grocery market through focusing its full attention and resources on continuing to grow its category leading grocery brands. 

Premier Foods expects the short-term cash benefits from this transaction, excluding fees, to be approximately £28 million, which it intends to invest in its core Grocery business. Specifically, it is intended that capital expenditure in 2014 will be predominantly focused on improving capacity in the cake business including the investment of approximately £20 million in a new Snack Pack cake slice line at the company’s manufacturing site in Carlton, Barnsley.

The transaction is subject to approval by Premier Foods’ shareholders and obtaining relevant consent/waivers from Premier Foods’ lenders and pension scheme trustees, as well as competition approval from the European Commission. The transaction is expected to complete during the second quarter of 2014.

For the year ended 31 December 2013, unaudited results of the business which will comprise the joint venture were as follows: sales of £654.6 million, Divisional Contribution of £27.8 million, trading profit of £6.3 million and EBITDA of £21.9 million. The gross assets of the business entering the joint venture were £240.6 million as at 31 December 2013. Following the completion of the transaction, Premier Foods will reflect the joint venture as a minority interest in its financial statements.

Gavin Darby, chief executive of Premier Foods.

Gavin Darby, chief executive of Premier Foods, says: “This is exciting news for the Bread business and a great deal for Premier Foods. We can now focus our attention and resources on developing our category leading Grocery brands.”

He adds: “I’m delighted that we’ve found a strong partner in The Gores Group who will help provide the investment necessary to develop the Bread business. This will be good for our customers, our employees and all those connected with the business. A joint venture arrangement also means we will share in the future gains from this investment as the business continues its return to profitable growth, helping us maximise value creation. Both parties are excited by the opportunities this transaction brings.”

Fernando Goni, managing director of The Gores Group, says: “We are excited to partner with Premier Foods to revive the Hovis brand and spearhead re-investment across the Bread business. We believe there is significant untapped potential in such a well-loved, household name and are confident in the abilities of the talented management team to drive value for all stakeholders. The Gores Group has a rich history of working alongside corporate partners to unlock latent value in divisions that require operational and commercial improvement and, as such, we are convinced that Hovis offers a perfect fit for our unique capabilities.”

The joint venture will be led by Bob Spooner, who will become chief executive upon completion. Bob Spooner is currently managing director Bread and Group Supply Chain director for Premier Foods and was responsible for leading the first stages of the restructuring of the Bread business over the past 18 months. Bob Spooner will be a member of the board of directors for the joint venture which will include five additional directors: two nominated by Premier Foods, two nominated by The Gores Group and an independent chairman to be appointed by the joint venture partners.

About Author

mike

mike

Related Articles



Food & Drink Business Conference & Exhibition 2016

Upcoming Events

  • January 19, 2018International Green Week
  • January 20, 2018Sigep Rimini
  • January 24, 2018International Bulk Wine and Spirits Show (IBWSS)
  • January 28, 2018ProSweets Cologne (Int'l Sweets and Biscuits Fair)
AEC v1.0.4

find food jobs

The Magazine

F&D Business Preferred Suppliers

New Subscriber





Subscribe Here



Advertisements