Premier Foods divestment shows its desperate plight

By Rod Addy

- Last updated on GMT

Associated British Foods buys Elephant Atta from Premier Foods

Related tags: Term, Bread, Premier foods

Premier Foods’ sale of its ethnic flour business Elephant Atta for £34m was a sign of how desperate it was to right its balance sheet, according to market commentators.

The UK branded foods manufacturer announced the sale of the business this morning to Associated British Foods’ (ABF’s) Westmill Foods subsidiary.

Julian Wild, food group director at Rollits Solictitors, which handles the legal side of mergers and acquisitions for clients including a number of food firms, told FoodNavigator: “This just goes to show that Premier Foods are pretty much in break-up mode. It maintains it is going to continue with its eight power brands, but obviously pretty much anything else is for sale.

“It is delivering [divestments], but the problem is it is continually raiding profitable business to generate cash. That’s not doing much for the long-term profitability of the Premier Foods business.”

However, he gave credit to the Premier Foods team for the swift rate at which they were securing firm deals for its brands.

Question mark remains

One analyst agreed: “One could see the benefit to ABF of this deal ; Elephant Atta is a popular brand sold into UK ethnic restaurants and takeaway outlets. In the short term, Premier obviously gains the cash benefit, but a question mark remains over the long term wisdom of this divestment.”

Premier Foods said it would continue to mill and package the flour for Elephant Atta products initially for a period of 12 months from the group’s mill in Southampton. The brands will be managed independently by Westmill Foods until regulatory approval is obtained for the deal.

In a statement, a spokesman for ABF said: “We would like to take this opportunity to assure valued customers of the Elephant and Fassal Atta brands that we are 100% focussed on maintaining the high product quality standards of the brands and ensuring continued levels of customer service. Retailers will be able to continue to purchase through their existing suppliers.”

Elephant Atta will complement other ethnic brands

ABF chief executive George Weston said: “Elephant Atta is the UK’s leading ethnic flour brand and will complement Westmill’s other leading ethnic brands including Tolly Boy rice; Rajah spices; Lucky Boat noodles and Patak’s pastes and sauces.”

Elephant Atta was established in 1962 and the brand is sold in a variety of medium, self-raising, white, brown and wholemeal flours. It is used to make chapatti and other unleavened flat bread for daily consumption.

Premier Foods chief executive Michael Clarke said: “We are continuing to deliver on our growth strategies, growing our power brands, divesting selected, non-core businesses and reducing costs on track with our plans. The Elephant Atta brands are great brands that I’m sure will benefit from being part of Westmill Foods.”

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