Coming soon: sale of Premier Foods’ spreads business

09-Jul-2012 - Last updated on 10-Jul-2012 at 11:48 GMT

Premier's spreads business is likely to be the next sale

Premier Foods’ spreads business will be its next disposal, according to the City’s predictions.

Analysts also suggested that sales of the Ambrosia brand and the powdered food business would follow.

Julian Wild, food group director at legal firm Rollits, said the sale of Premier’s spreads business, which includes Sun-Pat and Hartley’s Jam, has been “ongoing for six months” and was now “well on”.

He told FoodManufacture.co.uk: “Several players are rumoured to be interested, including a number of private equity buyers and one or two trade players.”

He named Hain Celestial and Morgan Stanley as potential buyers.

Darren Shirley, analyst with Shore Capital concurred that the spreads business would be next for sale but also thought that Premier would part with its powdered foods business, including the Bird’s custard brand.

He told FoodManufacture.co.uk: “They’ve got to raise £200M by December 2013, so there has to be more disposals.”

Possible power brand sale

Warren Ackerman, md of equity research at Societe Generale, thought Hartley’s Jam was the next likely candidate for disposal. He even suggested Premier would consider selling one of its power brands: Ambrosia.

He told FoodManufacture.co.uk: “Following Dairy Crest’s £30M disposal of St Hubert, they are looking at UK brands, so Premier’s Ambrosia brand could be of interest to them in the near future.”

Wild questioned the appeal of some of Premier’s power brands such as Oxo, which he claimed was not “sexy”.

“They were probably the eight best branded areas that they’ve got,” said Wild. “Some, like Hovis, are too big to dispose of, given the state of the bread market. And it’s hard to think of a buyer for a cake business such as Mr Kipling.”

He shed doubt on the long-term sustainability of Premier’s business once sufficient disposals had been made to make the debt more manageable.

“They [Premier] are giving away a lot of their profitability. I would have some pretty considerable doubts about its sustainability as a business.”

Major retailers

Wild claimed the stock market had fallen out of love with the food industry because it was seen to be in the grip of the major retailers.

“Food has been seen as an unattractive place for the stock market since the major retailers started to dominate from the beginning of 2000. There’s now a big question mark over food companies.”

With a few exceptions “such as Cranswick, Tate & Lyle and Associated British Foods,” Wild said the UK’s food industry was “a shadow of its former self” as a result of “a whole string of companies being gobbled up”. He cited the acquisitions of Northern Foods, Unigate, Wiseman, Hazelwood and United Biscuits.

“These were all pillars of the quoted [plc] food sector and they have either disappeared altogether or have changed ownership.”

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