The development of Hovis Limited means that embattled Premier Foods will raise £28m in cash – which it will invest in its other ambient grocery products.
The deal valued the bread business – which includes the company’s milling operation – at £87.5m and means Premier Foods will retain a 49% stake.
In a statement, Premier Foods said: “Premier Foods considers a joint venture to be the best way to maximise value in the bread business, through securing new investment and retaining the opportunity to share in the expected future gains from this investment as the business continues its return to profitable growth.”
The transaction is subject to approval by Premier Foods’ shareholders and obtaining relevant consent/waivers from Premier Foods’ lenders and pension scheme trustees, as well as competition approval from the European Commission. It is expected to complete during the second quarter of 2014.
Gavin Darby, chief executive officer of Premier Foods, said: “This is exciting news for the Bread business and a great deal for Premier Foods. We can now focus our attention and resources on developing our category-leading grocery brands.
“I’m delighted that we’ve found a strong partner in The Gores Group, which will help provide the investment necessary to develop the Bread business. This will be good for our customers, our employees and all those connected with the business. A joint venture arrangement also means we will share in the future gains from this investment as the business continues its return to profitable growth, helping us maximise value creation. Both parties are excited by the opportunities this transaction brings.”
The joint venture will be led by Bob Spooner, who will become chief executive officer upon
completion. Spooner is currently managing director, Bread, and group supply chain director for Premier
Foods and was responsible for leading the first stages of restructuring the Bread business over
the past 18 months.