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City sceptical on Premier Foods’ Hovis Grupo Bimbo sale

By Mike Stones+

16-Sep-2013

Panmure Gordon was sceptical about rumours suggesting Grupo Bimbo will acquire Hovis
Panmure Gordon was sceptical about rumours suggesting Grupo Bimbo will acquire Hovis

City analysts remain doubtful about media reports speculating Premier Foods is considering selling its Hovis brand to the world’s biggest baker Grupo Bimbo.

Panmure Gordon’s equities director Graham Jones said: “We are sceptical about the rumours suggesting Grupo Bimbo will acquire Hovis. And, in any case, selling another large chunk of cash flow may not necessarily be the right move given that the pension liabilities tend to be retained by the group.”

Shore Capital said the fact that Premier Foods has not made an announcement to the market suggested the group’s board has not yet been presented with anything firm on which to comment.

Hovis brand under pressure

Its analysts Darren Shirley and Clive Black noted the Hovis brand had been under pressure for some time – particularly after the loss of the key Co-operative stores volume to Allied Bakeries.

Investec’s Martin Deboo commented on the stellar performance of Premier Foods’ shares since it posted first-half results in June.

“The H1s [first half results] weren’t announced at Cape Canaveral,” said Deboo. “But they should have been, given the trajectory of the shares. These have more than doubled, in just three months, as the market inhales the heady fumes of rising profits, falling bond rates, and perhaps even the possible sale of Hovis to Grupo Bimbo of Mexico.”

Read how Premier Foods may choose to meet its twin challenges of debt and pension obligations here .

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