Premier Foods' Quorn deal set to complete within days

By Elaine Watson

- Last updated on GMT

Related tags: Quorn, Premier foods

Premier Foods' Quorn deal set to complete within days
Premier Foods is very close to completing the sale of its Quorn and Cauldron Foods meat-free division, understands.

One source close to the firm, shares in which rose 7.7% to 22.35p on Friday, told he expected the deal to be closed "within days".

One corporate finance source said: “What’s been holding the sale back is the price. Initially we were hearing figures in the £250m region but I think they will be lucky to get anything starting with a 2."

Meat-free: Back in growth

Total meat-free sales were up 1.6% to £32m in the three months to September 30 after a disappointing first half, a turnaround Premier Foods chief executive Robert Schofield (pictured) said was encouraging given that the UK market for meat-free products was down 9.1% over the same period.

Methwold restructuring

While a re-organisation of one production line at the factory in Methwold, Norfork – where Cauldron products used to be manufactured and Quorn is packed – has recently delivered a 10% improvement in throughput, the meat-free division has struggled to realise its potential in recent years.

Premier spent £3m last year and a further £1m in the first half of 2010 on "supply chain restructuring initiatives​" to resolve "production inefficiencies​" at Methwold, which has undergone significant restructuring in the past year with the outsourcing of Cauldron-branded tofu products, allowing it to focus on Quorn.

According to Premier, "Methwold was hampered by an inefficient tofu manufacturing process so the decision was taken
to outsource production of Cauldron products to third party manufacturers with more modern facilities."

The restructuring saw the senior management team cut from eight to five and the total indirect staff reduced by a third,
saving £1m. Further cuts in factory overheads delivered additional savings of £1m, revealed the firm in the September issue of staff newsletter Being Premier.

Hands off - and then hands back on ...

One source told “When they acquired​ [Quorn owner] Marlow Foods​ [in June 2005, price tag £172m] and Cauldron [October 2005, price tag £27m], they were very hands-off, and they let them get on with it.

“But while Quorn really should be the jewel in Premier’s crown - it ticks all the right boxes as a more sustainable source of protein - it has not been a big money maker. But I think it probably could be for someone else.”

Bell: We must overcome tendency to act like traders instead of brand-builders

In the December issue of Being Premier,​ new chairman Ronnie Bell told staff that he was well aware that 2011 had to be the year of delivery for the business, which one corporate finance source told last month was "going absolutely nowhere".

Bell said: “There are some challenges in terms of our balance sheet, the complexity of operations, the variable quality of some of our manufacturing sites and our tendency to act like traders rather than brand builders, but nothing that cannot be addressed.

“My initial priorities are all about delivery. We need to deliver the financial strategy, deliver our trading results, deliver more innovation and growth, especially for drive brands, and deliver development for our people.”

No news on canning sites disposal

Premier Foods, which is also in talks over the sale of its canning plants in Wisbech and Long Sutton, revealed it was in advanced negotiations with two potential buyers of its meat-free business in December.

Bosses would consider selling any part of the Premier Foods empire provided this did not diminish the capacity of the remaining business to repay debts and service its pension deficit, it reiterated.

“The board remains open-minded about disposals, provided they deliver shareholder value and accelerate the reduction of average net debt/EBITDA (earnings before interest, tax, depreciation and goodwill amortisation).”

Premier Foods will release its full-year results for 2010 on February 15.

Related topics: Ambient foods, Chilled foods, Frozen

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