Premier Foods to sell chilled foods unit

UK-based food company Premier Foods has signed an agreement to sell its lossmaking Brookes Avana business to 2 Sisters Food for a cash consideration of £30m ($47m) as part of its strategy to reduce £1.27bn ($1.99bn) of net debt.

Brookes Avana, which includes RF Brookes chilled foods and Avana Bakeries, is one of the few businesses that the company is divesting.

Premier Foods CEO Michael Clarke said the sale of Brookes Avana underlines the company’s commitment to focus the business on growing a smaller number of brands.

"Brookes Avana will have a better opportunity to grow with 2 Sisters Food Group, given their focus on the chilled food sector," Clarke added.

The deal, which is expected to be completed by early 2012, includes the sale of three Brookes Avana sites at Newport (RF Brookes and Avana Bakeries) and Leicester (RF Brookes), and the transfer of nearly 2,000 employees.

Premier Foods and 2 Sisters have also entered into manufacturing agreements for certain products currently manufactured by the Brookes Avana business.

For the half year that ended 25 June 2011, Brookes Avana posted a trading loss of £13.3m ($20.86m) and, in the Q3 interim management statement (IMS), Premier Foods said that Brookes Avana’s trading in the second half was expected to be similar to that of the first half.

Brookes Avana supplies chilled foods, ready meals, cakes and puddings to retailers, caterers and restaurant chains, and it recently lost a £30m ($47m) contract with Marks & Spencer, which created a significant dent in its revenues.

On 7 October, Premier Foods 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 down its debt and is holding intense negotiations with its creditors, who recently gave a grace period on covenant tests until 31 March.