Premier Recruits Goldman To Raise Hovis Dough
Britain's largest branded food manufacturer has drafted in Goldman Sachs to sound out buyers for its Hovis bread division as it struggles to combat declining margins triggered by rising wheat prices.
I have learned that Premier Foods has asked the Wall Street bank to solicit bids for the unit in a move that would lead to an effective break-up of the company and a reversal of the £2bn merger of Premier and RHM in 2007.
Bankers said that it could make sense to sell the Hovis brand and the rest of the bread division to separate buyers.
Premier carved out Hovis into a separate unit earlier this month as part of a broader restructuring of the company that has seen it sell brands including Quorn, the meat substitute, and Hartley's jams.
The disposals have raised hundreds of millions of pounds for Premier but it continues to be afflicted by a large debt burden and pension deficit which have constrained its investment capacity.
A sale of Hovis is not the only option being considered by Premier, and the company will not sanction a sale unless it receives an attractive price, insiders said.
Michael Clarke, the company's chief executive, said this week that he had "a road map [for the bread business] but we are not willing to share it yet".
Mr Clarke also disclosed that Premier has surrendered a £75m own-label bread contract with one of the UK's major supermarket chains because of the poor margins it generated.
Like other bread producers, Premier has been hit by waning consumer interest in sliced bread, the high logistics costs associated with the business and this year's poor UK wheat harvest.
Premier declined to comment on Goldman's appointment.