Hovis owner Premier Foods eyes £300m rights issue in the New Year
Premier Foods, whose brands include Hovis, Oxo and Mr Kipling cakes, is expected to launch a £250illion to £300million rights issue in the New Year.
A capital raising of that size would bring down the embattled company’s debt to around £500million.
The food firm is likely to seek fresh capital to try and fend off US vulture fund Apollo, understood to have hoovered up around £100million in loans.
Food for thought: Premier Foods is seeking to pay down company debt
Apollo is adept at homing in on weak businesses, including taking control of biscuit maker Burtons when it fell into financial difficulty in 2009.
Premier, which employs around 9,000 staff in the UK, has spent the past six years selling off assets but still has a pension deficit and debt pile of £1.3billion, far exceeding its stock market value.
The firm also faces a cash crunch, with analysts warning Premier needs £110million to cover fees, interest and payments into its pension fund.
The company ran into difficulty after a takeover spree that left it with an overstretched balance sheet in the midst of the global financial crisis.
Analysts at Credit Suisse said investors in the company have had little to cheer since Premier Foods, RHM and the UK business of Campbells were put together in 2006/7.
‘There is no point raking over what went wrong but suffice it to say the 90 per cent fall in the share price pretty much summarises it,’ the bank said. The shares closed last week up 1.5p at 130.5p, having risen from a low point this year of 59.75p in the summer.
But Credit Suisse said there are now signs the business has stabilised and may even be beginning to show signs of growth.
Chief executive Gavin Darby has said the company has been in financial restructuring for six years and he would like to bring that to an end in 2014. As well as the rights issue, he is also expected to refinance debt and try to negotiate a holiday from pension payments. An existing two year pension holiday expires this month.
Darby, who has previously worked for Coca-Cola and Vodafone, took over in February this year. His predecessor quit after 17 months.
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