Premier Foods has agree a stand-alone joint venture with The Gores Group for its bread business in a bid to reinvigorate its Hovis brand.
The agreement has seen the company agree the sale of 51 per cent of its bread business, valued at £87.5m, which will mean a short-term cash flow of £28m will be invested into its grocery business.
The company has said that it believed the joint venture was the best way for it to reinvigorate the Hovis brand and maximise the value of its bread business, with The Gores Group set to pay £30m for its controlling stake, with around £200m set to be invested in the business to improve its infrastructure of the coming five years.
Shareholders are yet to approve the deal, which is expected to be completed by the second quarter of this year.
Meanwhile, the company has revealed year-end figures of £654.6m in sales, and a trading profit of £6.3m for 2013.
Gavin Darby, CEO of Premier Foods, described the deal as “exciting news” for its bread division, and added that it would allow the company to focus on developing it 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. 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,” he continued.
The company’s grocery power brand sales were reported to have increased by 2 per cent for the full year, despite a decline of 1 per cent during the final quarter as a result of ‘the tough consumer environment’ and ‘high’ promotional activity.
Underlying sales of Hovis were also reported to have increased by 5.3 per cent during the final quarter.
Fernando Goni, managing director for The Gores Group, said that he was ‘excited’ by the opportunity to revive Hovis and reinvest in the bread business
"We believe there is significant untapped potential in such a well-loved, household name and are confident in the abilities of the talented management team to drive value for all stakeholders. The Gores Group has a rich history of working alongside corporate partners to unlock latent value in divisions that require operational and commercial improvement and, as such, we are convinced that Hovis offers a perfect fit for our unique capabilities."
Bob Spooner, managing director of bread and group supply chain at Premier Foods, will be named CEO of the joint venture one the deal is finalised.