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Premier Foods hands over control of Hovis

27 January 2014

Premier Foods is handing control of Hovis bread to US investment firm The Gores Group in a deal worth £87.5million. The Gores Group will pay £30m for a 51% stake in Hovis, with Premier retaining the rest.

The deal should enable Premier, which has suffered from intense competition from branded and private label bread producers, to focus on its other grocery brands, such as Mr Kipling cakes. Premier plans to invest £28m in its grocery business as well as about £20m in a new line for Snack Pack cake slices at a factory in Carlton, Barnsley.

The two firms have also agreed to invest a combined £45m in Hovis, which will enable an investment of £200m over five years, to be used for capital expenditures and for an increase in marketing.

Premier’s chief executive officer, Gavin Darby, said: "We believe it's a win-win for both halves of our business.”

Both companies are locked in to the venture for at least three years, but Darby declined to say what would happen after that: "It all depends on what other incremental structural opportunities there are in the future," he said, referring to the company's ongoing capital restructuring plan.

The bread business will operate under the name Hovis Limited and will be run by Bob Spooner, currently managing director of Premier's bread and group supply chain.

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