Premier Foods to sell vinegar, sour pickles business to Mizkan

Premier Foods has agreed to sell its vinegar and sour pickles business to Japanese food firm Mizkan for £41m in cash, as part of its plan to reduce its debt to avoid a breach of its financial covenant with creditors.

The company’s vinegar and sour pickles business includes Sarson’s vinegar brand, Dufrais vinegar brand and Haywards pickles brand, which are mostly manufactured at the company’s factory in Middleton, UK.

Premier Foods CEO Michael Clarke said the sale of the brands will enable Premier Foods to focus on supporting its power brands.

Mizkan CEO Kazuhide Matazaemon Nakano VIII said the company is looking forward to investing in the brands.

"They fit well with our global portfolio, are an excellent strategic fit and provide a solid foundation for growth in the UK," Nakano added.

The deal includes the production, distribution, sales and marketing of the Sarson’s, Haywards and Dufrais brands, the associated private label business, the Middleton factory, and the pickled beetroot and piccalilli lines at the company’s factory in Bury St Edmunds.

For the 12 months to 31 December 2011, the vinegar and sour pickles business had a turnover of £34m and an EBITDA of £6.2m, and gross assets of £31.7m.

Premier Foods noted that the transaction, which is likely to be completed by July 2012, is expected to be initially earnings dilutive.

In early October 2011, the British food company announced that it will focus on investing in its eight ‘power brands’ Hovis, Mr Kipling, Ambrosia, Sharwoods, Oxo, Loyd Grossman, Bisto and Batchelors, and divest select businesses.

The company is struggling to pay off its debt of £1bn, which was built up through the acquisition of a number of brands including Homepride and Fray Bentos. 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 is divesting non-core brands Sarson’s, Dufrais and Haywards to focus on eight power brands and lower its debt of £1bn. Photo: Premier Foods.