Real Good Food is to sell its sugar distribution business Napier Brown for £34m to Tereos, the world’s fifth-largest sugar group.

The company, which also runs Renshaw, Whitworths Sugar and R&W Brown, said the sale had been brought about by a failure to find a supplier that wanted to work in a “strategic partnership”.

It added the proceeds from the sale would move it to a “net cash position” and would “both create the resources for investment and enable these resources to be focused on its remaining added-value businesses, with particular emphasis on the attractive markets of cake decoration, food ingredients and premium bakery”.

Commenting on the proposed sale, Pieter Totté, executive chairman of Real Good Food, said: “I am proud of what we have achieved in building the Napier Brown business and expanding its customer base and developing its supply chain. However, the changes taking place within the European sugar market mean the future of this business is best served by it becoming part of an international production group.

Transaction

“We believe Tereos is the best choice for both customers and employees. This transaction will allow us to focus all our resources on the continued growth of our remaining businesses. I would like to thank the staff and employees for their contribution over the years.”

Real Good Food warned earlier this month that Napier Brown had found trading “difficult” following reductions in the EU sugar market prices. It said that after a “very poor” first half, Napier Brown had returned to profit, but remained behind expectations for the year ending 31 March 2015, despite improved trading in the second half.

And last year Real Good Food had complained to the Competition & Markets Authority (CMA) about British Sugar, regarding unfair competition. However, this complaint was not followed up by an investigation.

A general meeting of shareholders will take place on 14 May to approve the sale.