Premier shares rise on hopes of Quorn sale
Published 04/10/2010 | 09:32
Shares in Premier Foods surged today after the the UK's biggest food producer confirmed it was considering a sale of meat substitute Quorn.
The Hovis-to-Mr Kipling group, which is under pressure to reduce a £1.4bn (€1.6bn) debt mountain, said in a statement yesterday it had received offers for its meat substitute brand, as well as the Cauldron vegetarian range.
Food giants Unilever and Nestle are seen as potential buyers for Premier Foods' meat-free business Quorn, City experts said today.
Martin Deboo, analyst at Investec Securities, said: "This is probably the one business within Premier that will attract the likes of Unilever and Nestle and their attendant deep pockets and ability to transact quickly."
Shares, which have remained near a record low due to the company's debt burden, were 15pc higher today.
Premier repeated its "open minded" stance to disposals, provided they offer shareholder value and help slash its burgeoning debt.
The group's borrowings have swollen after a takeover spree in recent years, including the Hovis bakery company RHM in 2007 for £1.2bn and the UK arm of Campbell's Soup in 2006 for about £450m.
Quorn, purchased for £172m (€198m) from Marlow Foods in 2005, is said to be valued at between £200m to £250m. It is understood to be one of a raft of brands potentially up for sale as part of a debt reduction plan.
Premier received an approach for the Mr Kipling cake business last year and there has been speculation its Hovis bread brand could go up for sale.
The group started struggling under debts during the credit crunch in 2008 and was forced to complete a £400m share placing to raise cash early last year.
The first Quorn product was launched in 1985 using a specially developed protein-based ingredient called mycoprotein, and it has since become a popular meat substitute for vegetarians.