Premier Foods to sell Irish brands to Boyne Valley

UK-based Premier Foods has signed an agreement to sell four of its Irish food brands to the Boyne Valley for a cash consideration of €41.4m, as part of its strategy to reduce £1.27bn ($1.99bn) of net debt and to avoid a breach of its financial covenant with creditors.

The four brands comprise Chivers, a range of jams and jelly; Gateaux, which includes 20 types of traditionally baked cakes; McDonnells, a range of noodles and curry sauces; and the licence for Erin soups in Ireland.

This announcement comes after the company agreed to sell its lossmaking Brookes Avana business to 2 Sisters Food for £30m earlier this month.

Premier Foods CEO Michael Clarke said the sale of these brands will enable the company to focus on supporting its power brands in line with its overall strategy.

"Coming hard on the heels of the announcement of the Brookes Avana sale agreement, this underlines our determination to streamline the business to help restore profitable growth quickly," Clarke said.

The deals, which are expected to be completed in 2012, also include manufacturing agreements between both the companies, under which Premier Foods will continue to manufacture the Irish brands for three years.

In 2010, the four brands had net and gross assets of €39.2m, and for the 12 months to 31 October 2011, they had a turnover of €26.2m and an EBITDA of €9.4m.

In early October, the British food company announced that it will focus on investing in the eight ‘power brands’: Hovis, Mr Kipling, Ambrosia, Sharwoods, Oxo, Loyd Grossman, Bisto and Batchelors, and divest selected businesses.

Premier Foods is struggling to pay off its debt and is holding negotiations with its creditors, who recently gave a grace period on covenant tests until 31 March.

Boyne Valley is a privately held company based in Drogheda, Ireland, and its existing food portfolio includes olive oil, relishes, home-baking and honey.