A YORKSHIRE company is poised for growth after securing a joint venture agreement with the maker of some of Britain’s best known food brands.
Premier Foods yesterday announced that it has reached a conditional agreement with Knaresborough-based Specialty Powders on a stand-alone joint venture to process and pack powdered beverages and desserts at Premier Foods’ Knighton facility in Staffordshire.
The new joint venture, to be named Knighton Foods, will combine the dry powders manufacturing skills and assets from both parties at the Knighton site.
The agreement will also lead to the transfer of two production lines from Knighton to Premier Foods’ manufacturing plant in Ashford, Kent.
The deal is expected to complete by the end of this month, and will result in the transfer of all 200 staff at the Knighton site to the new venture.
Premier’s chief executive Gavin Darby said the company had found a partner who was “highly successful and entrepreneurial” and committed to growing the business.
The move follows a deal earlier this year to hive off Premier’s Hovis arm into a joint venture with US private equity group Gores – cutting Premier’s holding to 49 per cent.
Mr Darby said: “This 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. This is a very positive development both for Premier Foods and for our employees at Knighton.”
Mike Kirby, the majority shareholder and group managing director of Specialty Powders, said: “This is a fantastic opportunity for both parties.
“Knighton Foods will have a strong focus on dry powder products with the ability to invest in new processes, products and packaging formats. Our combined technical expertise and manufacturing capabilities will ensure that we continue to deliver high quality products for our customers and consumers, and enable us to develop a successful, broad-based powder processing and packing business for the future.”
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 per cent controlling stake and a loan from the joint venture to repay its existing debt.
Premier Foods will contribute the Knighton site and assets, apart from the two production lines that will be transferred to Premier Foods’ site in Ashford, to the joint venture.
Premier will also contribute its private label and business-to-business sales of powdered beverages and desserts, for a 49 per cent stake in the joint venture and a promissory note of a principal amount equal to the loan to Specialty Powders.
Premier Foods will retain the “substantial majority” of its branded sales made at Knighton, including brands such as Bird’s, Angel Delight and Marvel, which will be manufactured either at its Ashford site or Knighton by the joint venture under a co-packing arrangement.
The proposed transaction includes the transfer of around £16m of private label and business-to-business sales of powdered beverages and desserts from Premier Foods to the joint venture.
Paul Cannings, the general manager of Specialty Powders, said the company had around 30 staff in Knaresborough and a turnover of £4m last year.
He said: “It’s a positive move. It gives us scale and access to increased technology.”
Specialty Powders has operations in Knaresborough, Corby and the Netherlands. Phoenix Foods, which was acquired by Specialty Powders in 2012, produces dry powdered and granular beverages food products.
Chris Schofield, Adrian Ballam and Caroline Thompson-Hayes, from law firm Schofield Sweeney, which has offices in Leeds and Bradford, are advising Specialty Powders in connection with the joint venture. Schofield Sweeney’s Dean Jowett is providing property advice.
The corporate finance advice to Specialty was given by Andy Rose and Lynsey Shaw at Sterling Corporate Finance in Leeds.