LONDON (ShareCast) - (Sharecast News) - Premier Foods rallied on Wednesday following a report the company is set to put its Hovis bread brand up for sale later in the year for as much as £150m.
According to Sky News, investment firm The Gores Group has hired bankers to sell the controlling 51% stake in Hovis it bought six years ago.

Sky cited City sources as saying that Hovis has appointed RW Baird to oversee an auction of the business.

Premier Foods, which also owns the Mr Kipling and Bisto brands, was understood to be looking to use the sale process to sell its 49% stake in the business following an improvement in its financial performance.

A spokesperson for Hovis said: "We do not comment on market rumour and speculation. Hovis is performing strongly as a business and Gores and Premier Foods remain supportive shareholders."

At 1335 BST, Premier Foods shares were up 9.3% at 52.02p.

Shore Capital analysts Clive Black and Darren Shirley said: "We do not know if Hovis is for sale or not. Understandably, neither Gores Group nor Premier Foods commented upon Mark Kleinman's story on Sky News. That said, we do not believe that he has made it up, so one senses smoke, but time will tell if there is a fire or not.

"From a vendor point of view, we can absolutely see that both Gores and Premier would be open to cash bid approaches for Hovis, an 'investment' that has notably been fully written-down in the latter's balance sheet. More challenging may be the potential for suitors (especially in the UK national proprietary brand arena where Allied Bakeries, part of Associated British Foods, has been restructuring largely through rationalisation), where any major player is going to have to navigate the UK Competition & Markets Authority, the agency seemingly determining the loss of two thousand jobs at Adelie Foods recently."

The analysts said there may be interest from regional brands, Irish and private label players, possibly private equity too, but that Hovis has effectively been available for some time.

A £100m price tag may be a bit rich, they said, but either way, "a sale would represent another particularly helpful step down in net debt and would further underscore the scope for a structural re-rating".

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