The debt-laden manufacturing giant has sealed a deal to sell its ranges of sauces and sweet pickles, including popular brand Branston to the Japanese firm as part of its ongoing process to consolidate its activities and clear a mountain of arrears close to £1bn (€1.23bn) built up during a spending spree before the economic downturn in 2007.
The £92.5m (€114.6m) cash deal includes the sale of Premier’s Branston sweet pickle, ketchup, relish, salad cream and mayonnaise, together with the firm's Bury St Edmunds factory in the UK.
The sale is the second deal between Premier and Mizkan, after the two firms agreed on a £41m (€50m) sale of its vinegar and sour pickles business – including the Sarson’s, Haywards and Dufrais brands – earlier this year.
Ahead of target
Expected to be finalised in early 2013, Premier said once the sale is completed the company would have exceeded its £330m disposal target by around £40m and almost two years ahead of its June 2014 deadline.
Premier Foods CEO Michael Clarke said: “We have exceeded our disposal target 20 months early while at the same time delivering three successive quarters of sales growth and taking £40m of overhead costs out of the business this year."
Speaking with FoodNavigator, Darren Shirley of Shore Capital said the deal was good business for Premier as it ‘ticks most of the boxes’ for the current disposal strategy.
The analyst said that reaching the initial target for disposals would reduce pressure on Premier to sell its businesses, and allow the firm to move forward with its business strategy without any distractions.
“They have done what they need to do to [in terms of disposals] and that leaves them with breathing space,” he said, adding that the reduction in pressure to sell would also allow Premier to be more selective on any future deals.
Focus on growth
Richard Johnson, director of corporate affairs at Premier told FoodNavigator that after meeting the disposal target the firm would now have a strong focus on growing the eight power brands identified in its 2011 annual report: Hovis, Mr Kipling, Ambrosia, Sharwoods, Loyd Grossman, Bisto, OXO, and Batchelors.
“Our Q3 results last week show that our grocery brands are growing nicely and we will focus on that,” said Johnson.
He added that while the pressure to sell any further business was reduced, “you can never say never about the future.”
Premier CEO, Clarke, said the firm could now focus attention on driving further momentum in its grocery, while unlocking value in its bread business.
Premier said the transaction included the transfer of production, distribution, sales, marketing and licensing of the Branston brand to Mizkan, in addition to the transfer of ‘significant private label business’ and its Bury St. Edmunds site.
All employees at the site were expected to transfer to Mizkan following an appropriate consultation process, said the firm.
In addition the two companies have have entered into a co-packing agreement which stipulates that Mizkan will continue to manufacture certain cooking sauces and other products at the Bury St Edmunds site for the next 15 years.