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(Sharecast News) - Premier Foods has sold its 49% stake in bread maker Hovis to UK private equity firm Endless, with proceeds of £37m to be used to strengthen the balance sheet.
The company, which owned Hovis in conjunction with US-based private equity firm The Gores Group, said the transaction closed on Thursday. Proceeds due to the group include the repayment of outstanding loan notes and accrued interest.
"Under Gores and Premier Foods' ownership, Hovis has undergone major supply chain restructuring. Hovis, which now focuses on bread baking following the disposal of its milling business, is commercially well positioned to grow under new ownership," Premier said.
"The group's investment in Hovis was fully written down in 2016. This transaction strengthens the group's financial position as it continues to improve its leverage profile."
Broker Peel Hunt said: "The company's investment was fully written-down in 2016, so this is a nice 'windfall', even if it's below the suggested numbers in the press.
"It provides the company with more optionality in terms of paying down debt, considering a dividend and investing in the business. It reduces our forecast for year-end net debt from £368m to £331m and net debt/EBITDA from 2.3x to 2.1x. Next news is the H1 results on 10 November."
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