American deal for Hovis ends more than 125 years of British ownership for bread brand
Hovis began life in 1886 and is perhaps most famous for its “Boy on the Bike” television advert in 1973 that was directed by Ridley Scott.
The deal with Los Angeles-based Gores, which is run by semi-professional poker player Alec Gores, marks the end of more than 125 years of Hovis being under British ownership.
The sale is the latest in a line of disposals by Premier to reduce its debt. The company has also sold Branston pickle, Sarson’s vinegar and Hartley’s jam to foreign buyers.
Gavin Darby, chief executive of Premier, said the sale of Hovis meant the food company could now be seen by investors as a “cleaner, simpler story”.
The Premier boss admitted that the board is “actively considering options” about the company’s financing.
He added: “This [the sale of Hovis] makes some of these options easier to contemplate.”
Clive Black, analyst at Shore Capital, said: “Whilst the devil is in the detail, particularly with respect to the pension position, we welcome this announcement respect to Hovis as it can start to allow the value of Premier’s grocery brands to emerge.
“Such emergence, however, depends upon the successful completion of the capital restructuring.”
Mr Darby said the sale of Hovis allows Premier to “have the best of both worlds”.
The under-pressure bread maker, which has been squeezed by supermarkets and rising commodity prices, will be spun off into a separate company called Hovis Ltd. This will include its mills and bakery facilities, which employ 4,000 people.
Premier and Gores have committed to investing £45m into Hovis in order to start a five-year plan that will involve spending £200m on modernising its facilities and the brand. The joint venture partners have agreed not to sell their shares in Hovis for at least three years.
At the same time, Premier will use the cash raised by selling the stake to invest in its Mr Kipling factory in Barnsley. The company will spend £20m on adding a new cake slice line at the manufacturing site.
As well as Hovis and Mr Kipling, Premier owns the Loyd Grossman, Sharwood’s, Bisto and Oxo brands. Mr Darby said the Hovis deal, which is subject to shareholder and regulatory approval, means Premier can “focus our attention and resources on developing our category leading grocery brands”.
In the year to December 31, sales of Premier’s leading “power brands” rose 2pc, despite a 1pc drop in the final three months of the year as consumers tightened their belts. Hovis sales rose 5.3pc in the final quarter.
Shares in Premier fell 2.18, or 1.5pc, to 141.57p.