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Premier Foods coy on bread sale

Premier Foods coy on bread sale

Premier foods has not give away any further details regarding the reports that it is poised to sell its ailing bread division to Mexican Grupo Bimbo.

A spokesman for the company, which counts Hovis as one of its brands, refused to confirm or deny the suggestions that were initially put forward by the Financial Times.

The paper claimed that it had already expressed an interest in the business.

Premier Foods has confirmed the recent press reports suggesting that it was looking for a partner to help raise funds for its bread business, adding that it had also appointed mergers and acquisitions specialist Ondra Partners to offer assistance in developing investment options for the business, which include co-investment by a partner.

“There can be no certainty that a transaction will follow at any point in the future, but the company will provide updates as appropriate,” it said in a statement.

The development has caused division among City analysts about the short-term prospects for the business.

Shore Capital has repeated its 'buy' advice on Premier's while Panmure Gordon kept its "sell" advice.

Shore's Clive Black and Darren Shirley said “We take considerable heart from the fact that Premier is seeking to proactively drive up shareholder value through a fresh approach to an at times challenged operation.”

Investec meanwhile, gave the business a 'hold' rating, although Panmure Gordon has remained unconvinced by the plans, highlighting doubts over whether it would bring about genuine results.

Panmure's executive director Graham Jones said: "We struggle to see how this [deal] would resolve Premier's balance sheet issues and still believe the optimal solution is a significant rights issue."

He added that Panmure had forecasted that the bread division would make £28 million of operating profit for the year, which would represent a 4.1 per cent margin. He also said that Premier's Hovis brand had now slipped to number three this year behind rival brand Kingsmill, and that price competition in the sector was set to continue in its high intensity.

 

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