UPDATE 2-Premier Foods trims debt with meat-free Quorn sale
* Sale of meat-free unit to private equity for 205 mln stg
* Company "open-minded" about further disposals
* Sale helps cut debt
* Shares gain 0.7 pct (Adds detail, share price, analyst comment, CFO comment)
LONDON, Jan 24 (Reuters) - Britain's largest food producer Premier Foods (PFD.L) agreed to sell its meat-free business for 205 million pounds ($326.7 million) to cut its debt and could make further disposals if the price was right.
"There's nothing in my portfolio that I'm saying is non-core, for sale, but I am open-minded to disposals," said Chief Financial Officer Jim Smart in a telephone interview on Monday.
The foods group said it had agreed to sell the unit - which includes its range of Quorn vegetarian products and Cauldron meat-free sausages - to Exponent Private Equity and Intermediate Capital Group (ICP.L), boosting its shares by 0.7 percent to 22.5 pence at 1151 GMT.
The disposal would help reduce its debt as a proportion of earnings, said Premier, also the maker of Bisto gravy and Branston pickle. Last year Premier's net debt stood at 1.37 billion pounds at the end of June.
"It (the sale) is positive in that it reduces the debt, the leverage in the business, but you could argue that Quorn and meat-free was one of the growth areas of the business and that they're having to sell the family silver," said Shore Capital analyst Darren Shirley.
Smart said Premier, which in November confirmed it had also received approaches for its canning operations, was focused on reducing its debt and it could pursue further asset sales if they would help bring it closer to its target debt level.
"If there are other people interested in other bits of the business we're open-minded ... but it would have to be full compensation for our shareholders and it would have to be at a ratio which would make some further contribution to reducing that debt-to-earnings before interest, taxes, depreciation and amortisation (EBITDA) ratio."
Analysts at JP Morgan Cazenove said Premier Food's ability to cut its debt remained a key concern for the market.
"Our view remains that if it [Premier] were to convince the market it can reduce its debt, there could be considerable upside to the shares given the leverage to the equity valuation," the broker said in a note.
Shares in Premier have risen 24 percent since Dec. 3 when it confirmed it was in advanced talks with two parties regarding the sale of Quorn, with one of the suitors believed to be the world's biggest food group Nestle (NESN.VX). [ID:nLDE6B209B]
At 205 million pounds, the value of the disposal was lower than the 230 million pounds suggested by media reports in December but Smart said he believed the 10.6 times EBITDA multiple achieved was "pretty good" for the food industry at the current time and at the upper end of analyst estimates. ($1=.6274 pounds) (Reporting by Sarah Young; Editing by Greg Mahlich)
- Tweet this
- Share this
- Digg this
- Factbox - Scotland's independence vote: How will the results come?
- Divided, Scots prepare to vote on fate of the United Kingdom |
- Australian PM says police raids follow threat of beheading
- Scots vote on independence referendum to seal the United Kingdom's fate
- Scottish supporters of United Kingdom have 4 percent point lead - YouGov poll