Quorn is a tasty vegetarian snack as Premier Foods nets £205m from sale

Premier Foods, the owner of a string of household names including Hovis and Mr Kipling, has sold its vegetarian brands Quorn and Cauldron to a private equity consortium for £205 million.

Exponent Private Equity and Intermediate Capital Group (ICG) bought the meat-free division, which has three manufacturing sites in the UK and employs nearly 600 staff, ending months of speculation over Premier's plans for the two brands.

The group has been weighing up its options as it looks to alleviate a 1.4 billion debt pile built up following an acquisition spree that included Hovis-owner RHM and Campbell's Soup in the UK and Ireland.

The deal means Premier is now likely to hit its debt targets two years ahead of schedule.

Robert Schofield, chief executive of Premier, said: "We are pleased to have concluded this sale agreement. It makes a significant contribution to reducing our debt.

"Having also recently completed the restructuring of our swaps portfolio, this deal represents another step along the road to achieving a capital structure which we believe will be more attractive to investors.

"It will also enable the business to focus further on building our current portfolio of great British brands."

In the year ending 31 December, the meat-free division made revenues of 128.8m and a trading profit of 16.2m.

The company said the structure of the business, including staff, will remain the same following the sale.

Quorn was purchased for 172m from Marlow Foods in 2005.

The first Quorn product was launched in 1985 using a specially developed ingredient called mycoprotein and it has since become a popular meat substitute for vegetarians.

Cauldron offers a range of tofu products and vegetarian sausages.

Premier said that, due to the unique properties of mycoprotein, the meat-free business had high-growth potential internationally, where meat-alternative markets are less developed than in the UK.

But the group's strategy is to focus its resources on the UK market and it added that it was not prepared to prioritise the development of the commercial infrastructure and distribution channels required to win a share of those international markets.

The meat-free business is operated on a substantially stand-alone basis from the rest of Premier Foods, and the company said the impact of the sale on the rest of the group would be minimal.

Chris Graham, founding partner of Exponent, which also has stakes in thetrainline.com and bed store chain Dreams, said the firm plans to grow the meat-free business further with additional investment.

Exponent is a private equity firm which focuses on companies with an enterprise value of between 75m and 350m. ICG provides "mezzanine" finance, leveraged credit and minority equity to companies worldwide.

The deal is conditional on receiving bank and shareholder consent.It is expected to complete in early March. Shares in Premier Foods rose initially following the announcement but closed down 2.5 per cent yesterday, at 21.8p.