Premier in £182m sale of canned operation

The sale comes hard on the heels of last month’s disposal of Quorn, which employs 320 staff in Stokesley, North Yorkshire, as Premier strives to offload non-core businesses.

As a predominantly non-branded business, the canned grocery operations are not a key area of focus for Premier.

Analyst Julian Hardwick at RBS said: “Around 57 per cent of its sales are non-branded, hence the sale will improve the quality of Premier’s grocery portfolio.”

Along with the business, Princes will acquire factories at Long Sutton in Lincolnshire and Wisbech in Cambridgeshire which employ more than 1,000 people.

Princes, which has a soft drinks site in Bradford, has also secured a long-term licence to make products such as baked beans and pasta in cans under the Branston and Batchelors brands.

Premier’s chief executive Robert Schofield said: “Combined with the proposed disposal of our meat-free business we will have delivered total gross proceeds of £387m, significantly accelerating the delivery of our financial strategy.”

At the end of June the firm’s net debt was £1.37bn.

Analysts at RBS said in a note: “We expect this disposal, along with the sale of Quorn and the group’s cash generation, to reduce net debt to around £800m by end 2011.”

Princes, the British unit of Japan’s biggest trading house Mitsubishi, hopes to complete the deal in late March.

The sale of the canning business coupled with the Quorn sale will enable Premier to focus on key brands such as Hovis and Mr Kipling.

Princes, which has grown from being an importer of canned fish into a supplier of products ranging from fruit juice and canned meat to microwave meals and sandwich spreads, will have annual revenues of £1.5bn following the deal.

It will also have 13 production sites and a 4,500-strong workforce.

The canning business includes Crosse & Blackwell and Fray Bentos and the lesser known Farrows and Smedley’s brands.

Premier’s canned grocery operation achieved sales in the region of £334m and underlying earnings of £32m in 2010.

The disposal excludes Premier’s Ambrosia branded canned desserts operations in Lifton, Devon, which is being retained.

Mr Schofield said: “Selling the business simplifies our operations and allows us to concentrate our efforts on our current portfolio of great British brands.”

The deal also improves Premier’s earnings to debt ratio – a key measure in the City – after an acquisition spree in recent years that has included Hovis owner RHM and Campbell’s Soup in the UK and Ireland.

Analyst Clive Black at Shore Capital said: “Unlike Quorn, the canning business cannot be placed in the camp of ‘family jewels’ and this is reflected in the more modest exit multiples.”

Two weeks ago Premier announced plans to sell its two vegetarian businesses Quorn and Cauldron for £205m and said it may dispose of other divisions to reduce debts.

The group, which first received interest in the vegetarian businesses last October, is selling them to Exponent Private Equity and Intermediate Capital Group.

The two have pledged to invest in the businesses and there will be no impact on factory jobs. Quorn employs 320 staff in Stokesley, North Yorkshire, plus another 60 at Billingham in Stockton-on-Tees.

Chris Graham, founding partner at Exponent, said: “We are pleased to be acquiring Quorn and Cauldron which are strong and robust brands with a loyal customer base. With additional investment both in the UK and internationally we believe we can grow the business further.”

Quorn was bought by Premier in 2005 when it acquired Marlow Foods for £172m.

[email protected]