Premier Foods tight-lipped on bread sale

By Michael Stones

- Last updated on GMT

Related tags Premier foods Stock Hovis

Premier Foods' plan to seek a financial partner for its bread business has divided City opinion
Premier Foods' plan to seek a financial partner for its bread business has divided City opinion
Premier Foods is remaining tight-lipped about reports that the Mexican bakery Grupo Bimbo may acquire its troubled bread division, as the firm’s short-term prospects divided City opinion.

A spokesman for the Hovis brand owner refused to confirm or deny today (November 11) reports that the Mexican giant might be interested in acquiring its bread division outright or in a joint venture agreement. Last week the Financial Times​ named Grupo Bimbo as a possible investor, claiming it had previously expressed an interest in acquiring the business.

Premier Foods acknowledged last week press reports that it is seeking a partner to raise funding for its bread business. It said it had appointed mergers and acquisitions specialist Ondra Partners to assist in developing investment options for the bread business, which included co-investment by a partner.

‘No certainty’

“There can be no certainty that a transaction will follow​ at any point in the future, but the company will provide updates as appropriate,”​ it said in a statement.

Meanwhile, City analysts remained divided about the short-term prospects for the business, with Shore Capital repeating its ‘buy’ advice on Premier’s stock, while Panmure Gordon maintained its ‘sell’ advice and Investec recommended ‘hold’. 

Shore Capital praised Premier Foods’ initiative in seeking a financial partner. “We take considerable heart from the fact that Premier is seeking to proactively drive up shareholder value through a fresh approach to an at times challenged operation,” ​said Clive Black and Darren Shirley.

‘Scope for a spin-off’

The analysts foresaw a number of potential opportunities, possibly involving new legal structures to allow for external capital to be injected into the business. “There may even be scope for a spin-off and de-consolidation from the group”, ​they added.

But Panmure Gordon was unconvinced that Premier Foods’ latest plan would yield results. “We struggle to see how this would resolve Premier’s balance sheet issues and still believe the optimal solution is a significant rights issue to raise £250–£300M,” ​said its executive director Graham Jones.

Investec analyst Martin Deboo maintained its hold advice but worried about about “organic sales shrinkage.”

“Recent share price volatility signals that Premier Foods is entering the narrow bit of the funnel where shifting sentiment around trading, bond rates (which influence debt and pension) and the prospects for a refinancing are all swinging the share price around,”​ said Deboo.

Related news

Show more

Related suppliers

Follow us

Featured Jobs

View more


Food Manufacture Podcast

Listen to the Food Manufacture podcast