US deal to give Hovis larger slice of market

Premier Foods is to get 200 million pounds of investment under a deal that will hand a major slice of the operation to an American firm.

Struggling bread business Hovis will receive £200m of investment under a deal that will hand over control to US investment firm The Gores Group.

Premier Foods, which has owned Hovis since March 2007, hopes the creation of a joint venture with the American private equity firm will help to reinvigorate the Hovis business after a long period of disappointing sales.

Los Angeles-based Gores is paying £30m for a 51 per cent controlling stake in the Hovis and Mothers Pride business, which has 4,000 staff at 10 bakeries and five flour mills.

Premier, which has three bakeries in Yorkshire at Barnsley, Bradford and Selby, said it will invest the proceeds in its grocery business.

Earlier this month Premier announced plans to invest £20m at its cake factory in Barnsley in a move that will safeguard jobs and double the factory’s capacity.

The cake manufacturing site in Fish Dam Lane in Carlton, Barnsley, specialises in making Mr Kipling cake slices.

The new line will be capable of producing 300 million cake slices a year, doubling the company’s current capacity, to meet growing consumer demand for its snack pack format of individually wrapped slices.

Yesterday’s deal puts an end to months of speculation about the direction of the ailing business, which has suffered from intense competition from branded and private label players.

Premier’s CEO Gavin Darby said: “We believe it’s a win-win for both halves of our business.”

The two parties have agreed to invest a combined £45m in Hovis, which will enable an investment of £200m over five years.