Premier Foods plc has sold ethnic flour business Elephant Atta to UK rival Associated British Foods, the latest disposal in its move to cut debts.
The GBP34m (US$52.8m) deal includes the Elephant Atta brand, which Premier described as the "leading" ethnic flour brand in the UK. ABF will also attain brands like Elephant Chakki Gold and Fassal.
Premier CEO Michael Clarke said: "We are continuing to deliver on our growth strategies, growing our Power Brands, divesting selected, non-core businesses and reducing costs on track with our plans."
The company's "power brands" include Hovis bread, Sharwood's cooking sauces and Ambrosia custard.
Last month, Premier sold its vinegar and sour pickles business, including the Sarson's and Haywards brands, to Japanese food group Mizkan.
There has been speculation Premier is also looking to offload its Hartley's spreads business. Hain Celestial has been named as a potential buyer, while private-equity firms are also said to be interested.
The disposals are part of plans to refocus Premier's business, reduce costs and lower debts. The sell-offs started before Clarke joined and included the sale of its meat-free business, which included the Quorn brand. However, under Clarke, the process has intensified with the plan to focus on selected "power brands".
PREMIER FOODS SELLS ELEPHANT ATTA ETHNIC FLOUR BUSINESS TO ASSOCIATED BRITISH FOODS FOR £34 MILLION
Premier Foods today announces that it has sold its Elephant Atta ethnic flour business to Westmill Foods, a subsidiary of Associated British Foods plc ("ABF"), for a cash consideration of £34 million.
The agreement represents another step in the Group's strategy to prioritise investment behind its Power Brands and divest selected, non-core businesses.
Elephant Atta is the UK's leading brand of ethnic flour. The sale includes the Elephant Atta, Elephant Chakki Gold and Fassal brands predominantly manufactured and packed at the Group's mill in Southampton.
Commenting on the sale, Michael Clarke, Chief Executive Officer, Premier Foods said:
"We are continuing to deliver on our growth strategies, growing our Power Brands, divesting selected, non-core businesses and reducing costs on track with our plans. The Elephant Atta brands are great brands that I'm sure will benefit from being part of Westmill Foods."
Sale Highlights
· The transaction included the distribution, sales, and marketing of ethnic flours under the Elephant Atta, Elephant Chakki Gold and Fassal brands;
· A consideration of £34 million was paid in cash on completion;
· The sale was made on a cash and debt-free basis;
· The proceeds of the sale will be used to pay down debt;
· All necessary consents under Premier Foods' finance facilities were received prior to the sale;
· Premier Foods and ABF have entered into a co-packing agreement pursuant to which Premier Foods will continue to manufacture the Elephant Atta brands at its Southampton mill;
· Premier Foods and ABF have entered into transitional services arrangements to facilitate the smooth transfer of the business; and
· One employee has transferred to Westmill Foods as part of the sale.
For the year ended 31 December 2011, the Elephant Atta business had reported revenues of £17.8 million and an EBITDA (before selling, general and administrative costs) of £6.4 million. The value of the transaction represents approximately 1.9x revenues. The gross assets of the Elephant Atta business as at 31 December 2011 were £3 million. As cumulative divestments take place, the Group will continue to challenge its overhead cost base to mitigate the impact of this and other transactions on earnings.
