The new arrangement will facilitate a significant increase in investment in the business to improve the efficiency of its operational infrastructure and to reinvigorate the Hovis brand.
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.
Under the terms of the agreement, The Gores Group will pay £30m for a 51% controlling stake in the joint venture, of which £15m is deferred and contingent on future business performance. As a result, the transaction values the bread business at an enterprise value of £87.5m, including £28.7m of working capital that will be retained by Premier Foods.
Premier Foods and The Gores Group have further agreed to invest a combined £45m in the business in proportion to their respective holding in the form of loan notes, of which £32m will be provided on completion of the transaction.
“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, who will help provide the investment necessary to develop the bread business,” said Gavin Darby, CEO of Premier Foods. “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.”
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