Premier sells jam and marmalade arm to concentrate on core brands

Premier Foods continued its strategy of offloading unwanted brands yesterday by agreeing the £200 million sale of its jam and marmalade business to a US rival.

The sale includes Hartley’s jam, Gales honey, Robertson’s marmalade and Sun-Pat peanut butter, along with the group’s Histon factory near Cambridge, where most of the products are made.

Premier, which also owns Mr Kipling cakes and Sharwood’s sauces, has set itself a target of raising £330m through the disposal of non-core brands. Yesterday’s cash and shares deal with Hain Celestial, owner of the Linda McCartney meat-free range, will take the total raised so far to around £275m.

Last month it completed the £41m sale of its vinegar and pickles business, including the Sarson’s brand, to Japanese group Mizkan.

Chief executive Michael Clarke said the latest sale was a “major step forward” in the group’s strategy of simplifying its business and concentrating on eight “power brands” – Ambrosia, Batchelors, Bisto, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood’s.

He added: “Our sweet spreads and jellies business was not core to Premier Foods and our employees in this business will benefit from being part of an international company that is committed to investing in, and growing, these categories.”

The business being sold generated a trading profit of £36.1m last year, on sales of £165m.

Investec analyst Martin Deboo said: “This was a deal they needed to do because this is probably their most valuable asset of those they can credibly dispose off.”

Along with Linda McCartney, Hain owns the New Covent Garden soup brand and produces more than 30 million sandwiches a year from its UK head office in Luton.

Irwin Simon, founder and chief executive of the New York-based group, said: “The acquisition of the Premier Foods brands furthers our goal to expand in the UK. Key to the success will be the experienced workforce and management at the Histon facility, who we look forward to working with.”

Hain’s net sales from its UK business grew nearly four-fold to $192.4m (£121.2m) in the year to 30 June, and Jefferies analyst Scott Mushkin said the deal with Premier made “tremendous sense”.

More than 380 people work at the Histon site, and Premier said all are expected to transfer to Hain “following an appropriate consultation process”.

The deal, subject to approval from Premier’s shareholders and banks, is expected to be completed by the end of October. The group, which is working to reduce a debt pile that stood at almost £1.3 billion in June, will receive £170m in cash and at least £30m worth of Hain shares in return for the spreads business.

Clarke said: “Following completion of this sale, we will have raised around £275m of the £330m disposal proceeds that we committed to achieving by June 2014. This will represent a 22 per cent reduction in our net debt since the half year.”