Panmure analyst Damian McNeela said the sale price was ahead of Panmure's expectation of £180M. “To date the company has raised proceeds of £275M and is undoubtedly making good progress towards its disposal proceeds target of £330M by June 2014,” he said in a note.
Cost savings are ahead of plan and should help to ease the profit dilution impact of the disposals, he added.
‘Precarious position’
But doubts about the firm's giant debt burden continued to cause concern. "Post the transaction, we forecast that net debt/EBITDA[earnings before interest, tax, depreciationand amortisation] will fall from 5.45x to 4.93x in FY [financial year] 2012. But they will rise from 4.78x to 4.99x in FY 2013. As such, we believe the business remains in a precarious position."
Premier boss Michael Clarke said: "This divestment is a major step forward in our strategy to simplify the business and focus on our Power Brands. Following completion of this sale, we will have raised around £275M of the £330M disposal proceeds that we committed to achieving by June 2014. This will represent a 22% reduction in our net debt since the half year.”
With its net debt/EBITDA expected to stay close to 5x in financial year 22013, Panmure maintained its 'hold' recommendation.
The sale includes the brands: Hartley's, Roberton's, Frank Cooper, Gales and Sun-Pat and the Histon factory where most are made.
International company
Clarke added its sweet spreads and jellies business was not core to Premier Foods. “Our employees in this business will benefit from being part of an international company that is committed to investing in, and growing, these categories," he said.
Irwin Simon, founder, president and ceo of Hain Celestial said: "In order for Hain Celestial to become the largest healthy food company in the UK, we needed to expand into ambient grocery where we have seen health and nutrition gain traction with consumers.
“The acquisition of the Premier Foods’ brands furthers our goal to expand in the United Kingdom with the addition of ambient grocery products. Key to the success will be the experienced workforce and management at the Histon facility who we look forward to working with."
Premier announced today (August 23) that it will receive £170M in cash and £30M in Hain Celestial shares, with the cash being used to repay its debt of £1.27bn.
