* 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 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
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.
(Reporting by Sarah Young; Editing by Greg Mahlich)