Premier must ‘slim down business’ to manage debt

By Gwen Ridler

- Last updated on GMT

Offloading brands could be the only way Premier Foods can pay off its debts
Offloading brands could be the only way Premier Foods can pay off its debts
Premier Foods’ only chance to manage is debts is to slim down the business, which could see it offloading some of its best-known brands, according to an industry insider.

The insider’s comment followed reports that Premier was seeking to offload the Mr Kipling cake brand and pave the way for a possible break-up, in a bid to settle its debts.

“There is no doubt that Premier are under intense pressure to reduce debt dramatically and, realistically, that can only be done by slimming the business down,”​ said the insider.

“Their failed attempt at selling Ambrosia only goes to show that, in the current difficult climate, it is not easy to offload mature businesses at a premium value.”

Health and wellness

With the industry pivoting towards healthier options and manufacturers reducing sugar in their products, Premier may be looking to let go of the Mr Kipling brand to fit in with the current health and wellness trend. However, the brand is one of the biggest drivers of revenue for the business and even saw a 12% boost in its full-year results.

“[Mr Kipling] is the leading branded cake player and the cake market is still significant,”​ the insider added.

The question remains just who could be eyeing up the brand – and it seemed unlikely that a UK business would be interested.

Own-label market

“The other major UK cake players are predominantly own-label and I struggle to see a UK trade player coming in,”​ the insider argued. “There are a number of large overseas bakery businesses, but I would be surprised if they see Mr Kipling as attractive.

“Private equity is always a possibility, given the abundant cash trying to find a home, but would a financial buyer get to the right valuation? Premier are in quite a bind and it’s difficult to see the answer.”

Meanwhile, Greencore is in a “leaner and stronger”​ position to grow UK sales after posting strong half-year figures in the wake of a period of restructuring that included the sale of its US business,​ its group chief financial officer has claimed.

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