“It’s a win-win deal,” Julian Wild, food group director at law firm Rollits, told FoodManufacture.co.uk: “For Premier, it [Brookes Avana] was a non core business and the firm was not a significant player in the chilled foods, ready meals or cakes [sectors],” said Wild. “Premier has been looking to sell the business for some time.”
In July, a source told FoodManufacture.co.uk that 2 Sisters and Greencore had held recent meetings with Premier Foods to discuss the potential purchase of Brookes Avana. But, at the time, the potential suitors declined to comment.
For 2 Sisters, the deal offered a big interest in a chilled food business and major supplier to Marks & Spencer. “It looks like a good fit for 2 Sisters at an attractive price for quite a large amount of turnover,” said Wild.
Panmure Gordon analyst Graham Jones agreed that the £30M price tag had bought 2 Sisters a large amount of turnover. The asking price for the business a year ago was £100M, he said.
While not questioning Premier’s selling price, Jones pointed out that the firm had liabilities of £1.6bn which included pension obligations.
Brooks Avana had been a very big employer with a workforce of 2,000, which would include the old RHM pension fund. That pension fund liability will remain with Premier Foods.
“It is a strategy that carries its own difficulties, if pension liabilities loom ever larger over a smaller cash base [as Premier focuses on a smaller core of businesses].
Trading profit for the year was £9.4M before the allocation of group and corporate costs.
Both analysts agreed that Premier’s spreads business was the most likely candidate for its next sale.
Jones said: “The spreads business seems like an obvious one. It dominates the UK spreads market, and is stable and cash generative. It should be attractive to somebody.”
At the end of last year Brookes Avana had net assets of £104.1M, gross assets of £147.4M including intangible assets of £65.2M.
For the half year ended 25 June 2011, Brookes Avana reported a trading loss of £13.3M.
Premier said the deal represented an important step in delivering the firm’s strategy of focusing on eight Power Brands.
Michael Clarke, Premier’s ceo, said: “The sale of Brookes Avana underlines our 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 in the chilled food sector. I wish them every success in the future.”
Ranjit Boparan, chief executive, 2 Sisters, said: “We are delighted to reach agreement on the proposed acquisition of Brookes Avana. The business has a strong track record in delivering high quality products for its customers and would provide a growth platform for 2 Sisters and increased product diversity to serve every eating occasion.”