Premier Foods announces conditional sale of its sweet pickles and table sauces business to Mizkan for £92.5M, subject to approval from Premier Foods' shareholders and consent from its banking syndicate

Nevin Barich

LONDON , October 30, 2012 (press release) – Premier Foods today announces it has entered into a conditional agreement to sell its sweet pickles and table sauces business (the “Disposal”) to Mizkan, for a cash consideration of £92.5 million, subject to approval by Premier Foods’ shareholders and consent from its banking syndicate. Once the Disposal is completed, the Company will have delivered around £370 million in disposal proceeds since March 2012, significantly exceeding the £330 million target it committed to achieve by June 2014 as part of its new financing arrangements. This will represent a reduction of approximately 30% in the Company’s net debt since the position reported at the Half Year (1)

The Disposal includes Branston sweet pickle, ketchup, relish, salad cream and mayonnaise, together with the Company’s Bury St Edmunds factory in Suffolk. Completion of the Disposal is expected to take place early in 2013 and all employees at the site are expected to transfer to Mizkan following an appropriate consultation process.

Following completion of the Disposal, the branded sales mix of the Company’s Grocery business will increase to approximately 90%.

Michael Clarke, Chief Executive Officer of Premier Foods, said:

“I’m delighted to have exceeded our disposal target 20 months early while at the same time delivering three successive quarters of sales growth and taking £40 million of overhead costs out of the business this year. We can now focus our attention on driving further momentum in our Grocery business and unlocking value in Bread.”

“Our disposals since March have achieved a healthy average EV/EBITDA multiple of 8.9x based on current year trading and expected overhead cost reductions. This is a good result in the current market.”

Kazuhide Matazaemon Nakano VIII, Chief Executive Officer, Mizkan, commented:

“Branston Sweet Pickle is an iconic brand that has established a market leading position. The Branston brand is also an excellent strategic fit with our global portfolio and adds to our solid foundation for growth in the UK.”

Transaction highlights

• The transaction includes the production, distribution, sales, marketing and licensing of the Branston brand, a significant private label business and the Bury St. Edmunds site.

• Consideration of £92.5 million is payable in cash on completion of the Disposal and is subject to an adjustment for the value of inventory transferred at completion.

• The proceeds of the Disposal will be used to pay down debt.

• Premier Foods and Mizkan have entered into a co-packing agreement pursuant to which Mizkan will continue to manufacture certain cooking sauces and other products at the Bury St Edmunds site for the next 15 years.

• Premier Foods and Mizkan have entered into transitional services arrangements to facilitate the smooth transfer of the business.

• The Disposal is conditional on the approval of the Company’s shareholders and consent from its banking syndicate, and is expected to complete early in 2013.

For the financial year ended 31 December 2011, sales (2) of the sweet pickles and table sauces business were £66.0 million, of which 54% were branded sales. EBITDA (3) for the year ended 31 December 2011 was £11.7 million and Trading Profit (4) was £8.5 million. The gross assets of the business being sold were £81.8 million as at 30 June 2012. As previously announced, to help mitigate the impact on the Company of this and other transactions announced this year, the Company expects to deliver further overhead cost reductions of £20 million in 2013, over and above the £40 million of savings that will be achieved by the end of 2012.

A circular will be sent to shareholders in due course giving details of the Disposal and containing a notice of a general meeting at which a resolution to approve the Disposal will be proposed.

-Ends-

For further information, please contact:

Premier Foods plc 01727 815 850
Richard Johnson, Corporate Affairs Director
Richard Godden, Head of Investor Relations

Maitland 020 7379 5151
Tom Buchanan
Brian Hudspith

Notes to editors:

1. Reported Net debt of the Company at 30 June 2012 was £1,269.4m.

2. Sales exclude Beetroot and Piccalilli which are manufactured at the Bury St Edmunds site under a co-packing agreement.

3. EBITDA is profit before interest, tax, depreciation, amortisation and selling, general and administrative costs.

4. Trading profit is before selling, general and administrative costs.

5. Mizkan is a 207 year old privately held international manufacturer, based in Japan. Mizkan has a stable of well-known international brands under the “mizkan” umbrella brand and is a leader in the liquid condiment category. Mizkan is one of the leading vinegar manufacturers in the world with operations in Japan, the United States, the UK and other Asian countries.

6. In July 2012, Mizkan acquired Premier Foods’ vinegar and sour pickles business for a cash consideration of £41 million. That transaction included the Sarson’s, Haywards and Dufrais brands.

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