ES in Premier Foods shot up more than 10 per cent yesterday in response to the news that it may sell its Quorn brand to an unnamed suitor.
The FTSE 250-listed firm closed up 10.43 per cent yesterday at 17.9p. The shares remain nearly 60 per cent short of their 12-month high.
Premier confirmed on Sunday it had received an approach for its meat-free division, which includes Quorn and Cauldron Foods. The company would not reveal who the interested party was, or what the asking price would be. Analysts estimated the division could sell for between £200m to £250m yesterday.
Quorn represents a small slice of Premier, with sales last year of £118m, or 4.4 per cent of total turnover. The company said in August it would pay off £100m of debt per year, in a fresh attempt to cut its £1.4bn debt pile.
“A disposal such as Quorn would be an encouraging step, however there will be no silver bullet and debt will remain high, with the company still locked into expensive swap agreements,” warned Warren Ackerman of Evolution Securities.
Institutional shareholders such as Paulson & Co, Warburg Pincus and Franklin Templeton are thought to have increased pressure on the company to speed up its plans to unload debt. Chief executive Robert Schofield launched a £400m debt restructuring and cash call in 2009 to avoid breaching banking covenants.
Several analysts raised concerns that the company risks selling its cash-generating brands for scant return.
“Quorn is the one of the few areas of the company that has long-term international
growth potential. This means the big fast-moving consumer goods players will be taking notice, but at the same time it is one of the company’s crown jewels,” said Shore Capital analyst Darren Shirley.