The UK-based food manufacturer announced it has reached an agreement to sell its vinegar and sour pickles business – including the Sarson’s, Haywards and Dufrais brands – to Mizkan for a cash consideration of £41 million.
The sale - expected to complete by the end of July – will help Premier to consolidate its activities as the firm grapples with debts of close to £1 billion GBP (€1.23 billion EUR), that the company built up during a spending spree before the economic downturn in 2007.
“This agreement represents another important step in our strategy to focus on our Power Brands,” said Premier Foods CEO Michael Clarke.
“I’m delighted that we have found a buyer such as Mizkan. Our vinegars and sour pickles business and employees will greatly benefit from being part of a global player focused on vinegar and liquid condiments,”
Meanwhile, Mizkan CEO Kazuhide Matazaemon Nakano VIII said the group is ‘excited’ to acquire two “strong and iconic brands that have such a deep heritage in the UK.”
“Sarson’s and Haywards are beloved by consumers and we look forward to investing in the brands and adding to their legacy. They fit well with our global portfolio, are an excellent strategic fit and provide a solid foundation for growth in the UK.”
Eastern investment?
The buy-out is the second major deal involving a British food brand and an Asian buyer in just over a month – after Chinese state-owned Bright Foods business bought a majority stake in Weetabix for £720m.
Last month, we reported that Bright’s deal to acquire a 60% share of the global cereal giant for an enterprise value of €1.48bn, could signal the beginning of a trend of European acquisitions from the Eastern markets.
At the time, Julian Wild, food group director at Rollits solicitors, told FoodNavigator the buy-out was one of a handful of acquisitions made by companies in India and China recently: “There’s a massive opportunity as the market in the Far East becomes more acclimatized to Western tastes. You are seeing it with Chinese and Indian companies. A lot of them are acquiring in the UK."
The new deal will see Mizkan take control of the production, distribution, sales and marketing of the Sarson’s, Haywards and Dufrais brands, in addition to associated private label business and the UK sites where the products are manufactured.
Correct strategy
Analysts Panmure Gordon, who predicted the sale of the brands and the UK manufacturing site last month, said: "In a way, this is the sort of stable, high margin, cash generative business that Premier should be keeping. But the need for cash is pressing and the strategy, we believe is correct.”
Graham Jones of Panmure said it has changed its recommendation from ‘sell’ to ‘hold’.
“The shares have fallen by 34% since our last note was published and we think the price now better reflects the risk/reward balance in the company, and as such we move from Sell to Hold, and maintain our 90p price target.”
Premier said the proceeds from the sale will be used to pay down its debt.