- £44 million deal to enhance earnings in year one
- Complements groups’ Sharwood’s and Loyd Grossman brands
- Expands ethnic foods business in Australia
Shares in Premier Foods (PFD) fattened up 4% to 117.5p after the Mr. Kipling cakes to Sharwood’s cooking sauces maker announced the £44 million acquisition of The Spice Tailor, a fast-growing Asian ingredients brand that should boost overseas growth prospects and enhance earnings in its first full year of ownership.
While Premier Foods is paying a fulsome two and a half times sales for the Indian spice business, Shore Capital points out The Spice Tailor is an ‘immature label’ which the food producer has the potential to ‘materially expand in the medium term’ thanks to its marketing clout and strong retailer relationships.
SPICEY POTENTIAL
Following on from last week’s reassuring first quarter trading update, where Premier reported a 6% increase in first quarter sales and further market share gains, the company has announced the purchase of profitable Indian and South East Asian meal kits and accompaniments brand The Spice Tailor.
A ‘foodies’ brand closely aligned to what Premier calls ‘current consumer trends’ including convenient home cooking, premiumisation and authenticity, The Spice Tailor is forecast to deliver strong sales and profit growth over the coming years.
Premier Foods insists The Spice Tailor is highly complementary to its Sharwood’s and Loyd Grossman brands, since it typically attracts different consumers.
STRONG GEOGRAPHICAL FIT
Premier Foods’ management, led by chief executive Alex Whitehouse, also highlighted a strong geographical fit with Premier Foods given The Spice Tailor’s presence in the UK, Australian, Canadian and Irish markets, and stressed the acquisition will significantly expand Premier Foods’ ethnic foods business in Australia.
Whitehouse said the acquisition is ‘well aligned to our growth strategy and we see a clear opportunity to build on the excellent track record of The Spice Tailor, by leveraging the elements of our proven branded growth model.’
He added the deal represents ‘a highly complementary geographical fit, and we see significant potential to expand The Spice Tailor’s distribution in all our target markets. We see this as another important milestone for us following the group’s strong performance over recent years and The Spice Tailor is an important addition to accelerate our future growth plans.’
THE SHORE CAPITAL VIEW
Shore Capital said it was ‘very pleased to see Premier commencing the bolt-on acquisition element of its broader growth strategy. If Spice Tailor is representative of what is to follow through time then we can expect the portfolio value of Premier’s proprietary brands to notably grow, pointing out the well-invested and leading market positions that the group has in the UK and, increasingly, Australia.’
