Premier Foods calls off sale of Ambrosia brand
By Michele Maatouk
Date: Friday 15 Feb 2019
(Sharecast News) - Mr Kipling, Bisto and Oxo owner Premier Foods has called off the sale of its Ambrosia brand.
The company, which first announced back in November that it was mulling the sale of the custard and rice pudding brand, said it has been in detailed talks with a small group of potential buyers since the new year.
However, it said the process "will not result in a satisfactory financial outcome" given the "present business climate".
"As a result, these discussions have now concluded."
Premier Foods said last year that the disposal would help the company fund the acceleration of its turnaround and focus on areas of the business that have the best potential for growth.
At 1220 GMT, the shares were down 3.5% to 35.90p.
Paul Hickman, analyst at Edison Investment Research said: "We take this to mean that the price would not be such as to contribute to its objective of reducing the borrowing ratio below the targeted 3.0x net debt/EBITDA by March 2020. As a result, more now depends on the achievement of the other strategic objectives, namely revenue growth, cost efficiencies, innovation and its logistics transformation programme."
Russ Mould, investment director at AJ Bell, said the company's failure to sell Ambrosia leaves it in a "sticky mess".
"Reports that the business could fetch more than £100m had raised hopes that Premier Foods would get a much-needed cash injection to help reduce its significant debts and have money to reinvest in the best-performing parts of the business.
"Being stuck with the custard maker now means Premier Foods may have to look elsewhere in its cupboard to see if there is anything of value to offload. There may be a temptation to sell some of the strongest brands in its portfolio to get a financial lifeline, yet that could damage the business longer term if it gets rid of something that has been central to the company's success.
"Companies don't want to get rid of their crown jewels but sometimes they think too short-term in nature and are guided by quick gains and, by doing so, lose long-term benefits should they have kept their best assets."
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