Premier Foods to sell sweet pickles and table sauces business to Mizkan

UK-based Premier Foods has entered into an agreement to sell its sweet pickles and table sauces business to Japanese food firm Mizkan for £92.5m.

The sale will include production, distribution, sales, marketing and licensing of the Branston branded sweet pickle, ketchup, relish, salad cream and mayonnaise, as well as Premier Foods’ Bury St Edmunds factory in Suffolk, UK.

For the 12 months to 31 December 2011, the sweet pickles and table sauces business had sales of £66m, EBITDA of £11.7m, and trading profit of £8.5m.

Following the completion of the deal, the company will have gained £370m through divestments since March 2012, higher than the £330m target it planned to reach by June 2014, in line with its new financing arrangements.

This represents a reduction of around 30% of the company’s debt since 30 June 2012 when it reported a net debt of £1.26bn.

Premier Foods chief executive officer Michael Clarke said the company has surpassed its disposal target 20 months early and has also reported three successive quarters of sales growth, while eliminating £40m of overhead costs.

"We can now focus our attention on driving further momentum in our Grocery business and unlocking value in Bread," Clarke added.

Mizkan chief executive officer Kazuhide Matazaemon Nakano VIII said that the Branston brand will fit well with the company’s global product range, and will provide a strong foundation for growth in the UK.

The deal, which is subject to approval by Premier Foods’ shareholders and consent from the banking syndicate, is likely to be completed in early 2013, following which all employees at the Bury St Edmunds site are expected to be transferred to Mizkan.

Premier Foods has been struggling to pay off its debt, which was built up through acquisitions of several brands including Homepride and Fray Bentos.

To lower its debt, the UK company announced in October 2011 that it would focus on eight ‘power brands’ that comprise Hovis, Mr Kipling, Ambrosia, Sharwoods, Oxo, Loyd Grossman, Bisto and Batchelors, and divest select businesses.

In March 2012, it renegotiated its bank debt, and received an extension of its repayment deadline from 2013 to 2016.

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Image: Premier Foods plans to sell its sweet pickles and table sauces business, which includes Branston branded sweet pickle, in order to lower its debt of £1.2bn. Photo courtesy of Premier Foods.