Premier Foods Drops Plans To Sell Dessert Brand Ambrosia
Mr Kipling cakes maker Premier Foods Plc said it has decided against selling Ambrosia rice pudding and custards brand to cut debt of over £500 million ($645 million), citing a tough business climate that could have dented the deal value.
Ambrosia was put up for sale in November, when Gavin Darby, who led the company from 2013, stepped down under pressure from an activist investor after failing to halt a share price slide since a proposed takeover by US food maker McCormick & Co Inc fell through two years ago.
The Board's Decision
"The Board has concluded that in the present business climate the process will not result in a satisfactory financial outcome. As a result, these discussions have now concluded," Premier Foods said in a statement.
The company's stock, which fell more than 22% in 2018, was 5.4% lower at 35.6 pence at 09:14 GMT.
Up to Thursday's close, the shares have lost over a third of their value since McCormick abandoned its approach in April 2016.
The Oxo-cube maker said a number of parties had expressed interest in the business.
It said in November that talks to sell Ambrosia, which accounts for under 10% of its total revenue, were in early stages and it expected strong demand for the brand.
However, a company spokesman on Friday declined to comment on the values on any offers made or who the interested parties were.
Premier Foods has been cutting costs as part of a two-year plan launched in 2017 by laying off people and streamlining its warehousing and distribution network.
Its plan to sell only Ambrosia were in contrast to activist hedge fund Oasis Management's demand to sell its Batchelors soup brands.
"While we expect this news to be taken negatively this morning, our consistent view has been that a disposal only makes sense at an EBITDA multiple sufficient to de-leverage PFD's debt and pension liabilities, not simply to reduce net debt," Jefferies analyst Martin Deboo said.
Deboo added the sale would have made sense at an exit multiple of about 6.5 times core earnings. "If this sort of number couldn't be achieved, then the decision to walk away as a sensible one."