Premier Foods enters into JV for £16m beverages and desserts business

Premier Foods has entered into another joint venture (JV) to manufacture powdered beverages and desserts worth around £16m.

The agreement with Specialty Powders Holdings Limited will see Premier’s private-label business in powdered beverages move to the new JV, called Knighton Foods. However, the Bird’s, Angel’s Delight and Marvel brands will stay with Premier.

Premier Foods said the decision would have little impact on its profits, with the private-label powered business having made a loss of £0.7m last year. The transaction will result in cash restructuring costs for Premier Foods of approximately £4m in 2014. A further £1m of capital expenditure will also be required, although this will be accommodated within current capital plans.

The move comes after Premier Foods, the country’s largest food producer, conducted a similar transaction earlier this year with Hovis.

Innovative

Gavin Darby, chief executive of Premier Foods, said: “This innovative agreement will help to improve the efficiency of Premier’s grocery infrastructure and, at the same time, allows us to benefit from a dedicated team with expertise that can support our powdered beverages and desserts business. I’m delighted that, in Specialty Powders, we’ve found a highly successful, entrepreneurial partner, which is committed to growing the combined business. This is a very positive development both for Premier Foods and for our employees at Knighton.”

Under the terms of the agreement, Specialty Powders will contribute its wholly-owned businesses, Phoenix Foods and Agglomeration Technology, to the joint venture, for a 51% controlling stake and a loan from the joint venture to repay its existing debt.

Premier Foods will contribute its Knighton site in Staffordshire to the joint venture, together with its private-label and business-to-business sales of powdered beverages and desserts, in consideration for a 49% stake in the joint venture and a promissory note of a principal amount equal to the loan to Specialty Powders.

In addition, the Brown & Polson brand of home-baking ingredients will be licensed to the JV for a period of five years, which also includes an option for the JV to purchase Brown & Polson for £2.75m.

The joint venture will be led by Mike Kirby, current majority shareholder and group managing director of Specialty Powders, who will become chairman of the JV upon completion

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