Premier Foods’ spreads is next ‘logical disposal’

Experts are now predicting the division, which includes Hartley’s Jam, will be “an obvious one to go​".

Martin Deboo, an analyst at Investec Securities, told FoodManufacture.co.uk: “It would certainly be a logical disposal. It has a stand-alone plant, meaning any buyer would gain both a tangible and an intangible asset in one hit. But at the moment it is just speculation​.”

Deboo’s comments were echoed by Panmure Gordon analyst, Graham Jones, who agreed that the business’s position, as a distinct entity, could make it an attractive option for potential suitors.

Obvious​

He told FoodManufacture.co.uk: “The spreads business seems like an obvious one to go. It is distinct from the rest of the business, and has its own factory. It dominates the UK spreads market, and is stable and cash generative. It should be attractive to somebody​.”

Julian Wild, Food Group Director at Law firm Rollits, added: “We know Premier has been looking to sell businesses for some time. And we know it has been looking to sell its spreads business, including Hartley.​”

The firm’s need to tackle liabilities of £1.6bn, which also included pension obligations, means other disposals are also likely, experts have warned.

‘Struggling for breath’​​

Jeff Stent, an analyst at Exane BNP Paribas, told FoodManufacture.co.uk: “I think Premier would sell anything it possibly could.​

“If you are struggling for breath then you don’t tend to be picky about the breathing apparatus​.”

The comments follow yesterday’s announcement​ that the firm had offloaded Brookes Avana to meat-processing giant 2 Sister’s Food Group, owned by food magnate Ranjit Boparan, in a £30M deal.

Premier said the move represented a major step in the firm’s strategy to focus its attention on eight key Power brands with further disposals expected in the near future.

Analysts have acknowledged Premier’s disposal plans but warned that the firm could face problems as its current debt problems will not be an attractive option to investors.

Jones said: “Premier’s disposal programme is logical, but it is to be hoped that more highly priced assets will be sold next in order to truly improve the balance sheet. ​

"That looks a difficult task though as the cash generating base of the group reduces. With unchanged, or even growing, pension liabilities, in our view this doesn’t present an attractive equity investment.​”

However, Deboo described the Brookes Avana deal as a “positive step​” on the path to recovery for the firm.

“In exchange for £30M in cash, Premier has lost a major distraction and an asset that we were forecasting to lose £25M this year. This feels like good business to us​,” he added.