6th Jun 2005 07:01
Premier Foods plc06 June 2005 6 June 2005 Acquisition of Marlow Foods Holdings Limited for £172m Category leading "Quorn" brand enhances Premier Foods' branded portfolio Premier Foods plc ("Premier") announces that it has agreed to acquire MarlowFoods Holdings Ltd ("Marlow Foods") the owner of Quorn, the UK's leading meatalternative brand, from Montagu Private Equity ("MPE") for £172m1. Theconsideration will be satisfied through a cash payment and completion isexpected to take place later today. In the year to 31 December 2004, Quorn sales were £79m (representing 100% of thesales of Marlow Foods). Normalised EBITDA2 for 2004 was £15.6m and profitbefore tax was £4.6m. The business had net operating assets of £48.3m and afterdeducting the net debt, which is largely due to the capital structure followingits acquisition by MPE in May 2003, and other liabilities, it had net assets of£3.0m at 31 December 2004. Since UK national launch in 1994, Quorn has grown to become the UK's largestmeat alternative brand with retail sales of £95m. Over the last five years,Quorn has achieved an average annual sales growth rate of over 7%. From itsinitial launch targeting the vegetarian consumer, Quorn has successfullyincreased its appeal amongst healthy eaters and those looking to reduce meatconsumption. Marlow Foods now offers a wide choice of Quorn branded productsranging from burgers, sausages and escalopes through to cottage pies andlasagne. Quorn provides Premier with a category-leading established brand with highgrowth prospects to add to its already strong "Drive" brand portfolio andincreases Premier's branded sales mix from 57%3 to 61%4. The UK accounts for 75%of Quorn sales and approximately 21% of sales are exported to Sweden,Switzerland, Belgium and Holland where Quorn holds category-leading positions.In addition, Quorn is the number two meat alternative brand in the natural foodssector in the USA. Quorn has over a 60% share of the £155m meat alternative category in the UK anda 15% share of the broader £640m meat free category. With approximately 70% ofhouseholds seeking to eat more healthily, Quorn's excellent health credentialsmean it is strongly aligned to consumer trends. Marlow Foods will continue to be run by its existing strong management team, ledby Managing Director, Nick Hughes, and will benefit from access to Premier'ssourcing and routes to market and its more developed presence in the foodservice channel. Premier also plans to increase brand investment to maximisegrowth potential. Premier will operate Marlow as a stand-alone unit, howeverthe acquisition is still expected to generate purchasing and administrationsynergies of £4m per annum by 2008. The deal should be earnings and margin enhancing in the first full year ofownership and is expected to achieve a return on invested capital greater thanits weighted average cost of capital in the second year of ownership5. Premier has refinanced all existing debt obligations within a new £780m debtfacility at an initial margin of 100 basis points over LIBOR, which compares to125 basis points payable under the previous debt facility. Cash funds for theacquisition of Marlow Foods will be satisfied from this new debt facility. Robert Schofield, Chief Executive of Premier Foods, said: "This is a fantastic acquisition for Premier Foods. Quorn's strong brandrecognition and leading category positions immediately provide Premier with avery strong branded position in an exciting growth market. Quorn is ideallyplaced to benefit from the increasing demand for healthy eating and thecombination with Premier should accelerate its growth. "Quorn fulfils all our acquisition criteria. It enhances our branded mix, it isUK focussed and meets all our financial hurdles. As well as being by far thelargest brand in its category, it will be the largest brand in our portfolio". Premier Foods will be hosting a presentation to analysts at 10am on 6 June 2005at ABN AMRO's offices, 250 Bishopsgate, London EC2M 4AA. The presentation will also be available via conference call on 020 8322 3319,passnumber 535107, with a telephone replay facility on 020 7081 9440, accountnumber 535107, pass number 954656, for 7 days. The presentation slides will beavailable at http://www.premierfoods.co.uk/about/investor/financial/financial-home.cfm at 10am on 6 June 2005. Please note that the Q&A session of the presentation will not be available onthe conference call. 1. The purchase price is £172m less acquired debt and is subject to atarget working capital adjustment. The acquired debt will be repaidimmediately. 2. Normalised EBITDA represents earnings before interest, tax,depreciation, amortisation and exceptional items adjusted for charges that willnot occur following the acquisition. 3. 2004 pro forma for the acquisition of the Bird's desserts business. 4. 2004 pro forma for the acquisition of the Bird's desserts business andMarlow Foods. 5. The statement that the impact of the deal should be earnings and marginenhancing in the first full year of ownership and is expected to achieve areturn on invested capital greater than its weighted average cost of capital inthe second year of ownership does not constitute a profit forecast and shouldnot be interpreted to mean that earnings per share in the financial yearcommencing 1 January 2005, or in any subsequent period, will necessarily matchor be greater than those for the relevant preceding financial period. For further information, please contact: Premier Foods plc Tel: 01727 815 850Robert Schofield, Chief ExecutivePaul Thomas, Finance DirectorRobert Lawson, Director of Mergers & Acquisitions and Investor RelationsGwyn Tyley, Investor Relations Manager Citigate Dewe Rogerson Tel: 020 7638 9571Michael Berkeley,Sara Batchelor,Anthony Kennaway Notes to Editors 1. Marlow Foods, owned by Montagu Private Equity, is Europe's largest companydedicated to producing and marketing branded meat alternative products. MarlowFoods was founded in 1985 when it first started test marketing the Quorn brandin the UK. Quorn was launched nationally in 1994. Quorn was the winner of the 2004 Vegetarian Society Awards Category for BestMeat or Fish Substitute. 2. Quorn is made from mycoprotein which is a member of the fungi family, as aremushrooms, truffles and morels. It acts as a direct meat substitute. Quorn islow fat, high in fibre and a good source of protein. These characteristics meanit appeals to the health-conscious consumer, not just vegetarians or thosewanting to reduce their intake of meat. In the UK it has 90% brand recognition among consumers and is purchased by morethan 17% of households. Health rather than vegetarianism is the main growthdriver with an estimated 70% of households concerned about eating morehealthily. This compares to the UK vegetarian population which representsapproximately 5% of households. 3. Quorn operates in a number of distinct segments in both the chilled andfrozen markets, their contribution to UK 2004 sales is shown below: • Meal centres (burgers, sausages, fillets, escalopes) 37% • Ingredients (mince and pieces) 35% • Ready meals (cottage pie, roasts), 5% • Deli (sliced meat alternatives) 18% • Food service 5% 4. Marlow Foods manufactures Quorn products at two sites in the UK, Stokesleyin North Yorkshire and Belasis in Teeside. The company employs 360 people. 5. Pro forma profitability The historic results of the business have been adjusted to reflect the currentcost base of the business and also to strip out the impact of non-recurringitems. These adjusting items have been reviewed and agreed reasonable byreporting accountants. Such adjusting items include: • Write-back of historic royalty payments as the royalty period endedin January 2005. • Write back of monitoring and facility fees charged under previousownership. • A number of one off items, which both increased and reduced historicreported results. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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