Premier Foods has launched a joint venture - worth £87.5 million - with the US-based Gores Group, which will now run the troubled Hovis bread and flour business.
The deal was announced today (January 27th) and it will result in the food manufacturer retaining 49 per cent stake in the business.
Premier Foods expects the partnership to generate a short term cash inflow of about £28 million - which will be invested in its grocery business. The bread business will operate as a stand alone joint venture, which will trade under the name of Hovis Limited.
According to the firm, a partnership is the best way to maximise value in the bread business through “securing new investment and retaining the opportunity to share in the expected future gains from this investment, as the business continues its return to profitable growth”.
Premier Foods believes the joint venture will allow it to strengthen its position in the ambient grocery market as the company will be able to focus its full attention and resources on continuing to grow category-leading brands.
Gavin Darby, chief executive officer of Premier Foods, claimed the partnership was a great opportunity for the firm.
He said: “We can now focus our attention and resources on developing our category leading grocery brands.
“I’m delighted that we’ve found a strong partner in The Gores Group who will help provide the investment necessary to develop the Bread business. This will be good for our customers, our employees and all those connected with the business.“
Mr Darby added that the arrangement means that Premier Foods can share in future gains from the investment as the business continues to return profitable growth. He believes the partnership will help the firm maximise value creation.
Bob Spooner will lead the joint venture and will be appointed chief executive officer upon its completion. He is currently the managing director of bread and the group supply chain director.
Hovis Limited will be managed a board of directors, plus five additional directors. Two will be selected by Premier Foods and two will be nominated by the Gores Group. The fifth director will be an independent chairman to be appointed by the joint venture partners.