Debt test deferred for Premier, reported suitor for Greencore

The UK food group said its ‘banking syndicate’​ has deferred the company’s forthcoming debt test, due on the 31 December to the end of March next year, with Premier adding that this ‘confirms on-going bank support for the business’​.

The maker of well-known UK brands such as Branston, Hovis, and Mr Kipling said that “constructive discussions” were continuing over longer-term refinancing of its debt beyond its current maturity of December 2013.

Power brands ​

Last month saw Premier admitting its third-quarter results were “significantly below expectations​” with sales down 3.6% to £477M (€556m), and Hovis taking a particular hit. It will not know the full extent of the damage to its full-year profits until Christmas trading is over.

CEO Michael Clarke said Premier would be focusing on eight “power brands​”: Ambrosia, Batchelor’s, Bisto, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood’s. He added the company would “actively seek to dispose of businesses​” outside these brands.

Fresh thinking time ​

Clive Black, head of research at London-based Shore Capital Stockbrokers, in a note on the debt deferral announcement, said the “room is [now] available for Michael Clarke, the new CEO, to see through his fresh perspectives for the company; perspectives that already involve significant new management and the outline of a preferred structure for the company.” ​

But Black remains prudent in his analysis of Premier’s position, claiming that the sharp reality is that with a market capitalisation of £80m, the food group’s equity is subsumed by the debt and pension requirements of the business.

“Management believes that it does not need further equity to see through what are clearly survival plans. If this is so, there may actually be some value in the stock. ​

However, our caution on Premier has been sustained and fundamental for good reasons and until we have clarity as to the nature and extent of the group’s future balance sheet we must wish management well but remain cautious,”​ he added.

Mystery bidder for Greencore ​

Meanwhile, Irish food group, Greencore, declined to make a comment on an article in The Sunday Times​ yesterday claiming that private equity group, Clayton, Dubliner & Rice (CDR), is the bidder behind the approach made to the manufacturer last month.

CDR, which is advised by ex-Tesco CEO Sir Terry Leahy, bought US Foods, a large supplier of fresh meat, ready meals and frozen food to the US food service industry. And the private equity firm’s previous assets include Brakes, the UK food distribution group, which is held between 2002 and 2007.

Clive Black suggests good tactics and possibly opportunism by the potential bidder, claiming that Greencore's share price was “far too low”​ at the time at which the approach was revealed to the market.

“The present price would not be a satisfactory return for investors in Greencore to our minds, especially with the benefits from the Uniq acquisition still to come through,”​ notes the analyst, adding that Shore, of course, awaits official confirmation of the approach, the view of the Greencore Board and an offer price.

The Irish food manufacturer is currently close to finalising the acquisition of Uniq, a UK-based sandwich and dessert maker.

Greencore's takeover of the chilled foods firm was viewed by analysts as a consolation prize for its failure to get its hands on Northern Foods. The latter was snapped by Ranjit Boparan, owner of the 2 Sisters Group, earlier this year for £342M.