While this is a trade sale, analysts suggested that, with £290M more assets on the table to sell, Premier might see many of its businesses going to companies in emerging markets in Asia, which are staking out territory in the UK.
It could be stalked by China's Bright Foods, which recently acquired Weetabix for £720M, suggested Martin Deboo analyst from Investec.
He told FoodManufacture.co.uk: “The recent Bright foods Weetabix deal was rather different as that was about Chinese players with low costs of funding staking out territory, rather than seeking ‘hard’ synergies. However, Bright could be a potential buyer for the whole of Premier Foods.
“Premier is a big UK business and priced favourably, which is one of the reasons why it is still interesting stock despite its declining market capitalisation. We know Bright is interested in sizeable UK businesses, as it has looked at United Biscuits already.”
Positive step
Deboo welcomed the news of the vinegars sale as “a small but positive step in the right direction”. Premier has pledged to sell off £330M of assets by 2013 to meet its banking covenants. It needs to reduce debts built up in a 10-year spree of acquisitions.
“I wouldn’t want to see the sales rushed and would trade speed of disposals for value, given that Premier has bought itself a two-year window of stability in terms of financing,” he added.
Charlie Mills from Credit Suisse said: “Premier has committed to selling £330M of businesses and this is one that everyone thought would go. The sale price is consistent with expectations and its shares have risen 10% since the announcement so obviously investors have welcomed the news.
“Increasingly demand is coming from overseas, but the sales will probably be private equity deals. Premier has committed to making the sales by 2013, which is some way off. It would be better sooner rather than later.”
Darren Shirley from Shore Capital said: “It is encouraging that Premier is making progress with the sales, the price was a bit on the low side but it is a decent start. The issue you would have if a buyer from an emerging market took on Premier as a whole is its debt pile and pension liabilities. You would be more likely to see people picking off assets in the medium term, but if its fortunes are improving that could change.”
Vinegars business
Panmure Gordon's Graham Jones predicted the sale of the vinegars business, based in Middleton near Manchester, in a note issued in May.
He told Foodmanufacture.co.uk today (June 15) that he would have liked to have seen the sale price closer to £50M. But the deal was “perfectly respectable”, he added.
Jones added that he expected the other two factories highlighted in May to remain prime candidates for sale.
