Premier Foods Regulatory News (PFD)

8 February 2011

Premier Foods plc

("Premier Foods" or the "Group")

PROPOSED DISPOSAL OF CANNED GROCERY OPERATIONS TO PRINCES LIMITED

FOR £182 MILLION

Premier Foods announces that it has reached an agreement with Princes Limited (the "Buyer" or "Princes") to sell its East Anglian canned grocery operations (the "Business").

Highlights of the transaction:

·; Sale consideration of £182m which represents a multiple of 5.75 times EBITDA¹;

·; The Business is expected to report sales of £334m and EBITDA¹ of £32m in 2010. Of the 2010 sales, approximately 43% are branded;

·; After transaction and other related costs such as dilapidations totalling around £8m, the remaining proceeds will be used to pay down bank facility debt, representing a further material reduction in the Group's debt;

·; The effect of the sale will also reduce Premier Foods' average debt / EBITDA ratios by around 0.2x, making a further contribution toward reaching the target leverage ratio of below 3.25x; and

·; The sale is conditional on receiving consent from Premier Foods' lending banks, its shareholders and European Commission merger control clearance. The disposal is expected to complete in late March.

Background

Premier Foods' key priorities are to grow its branded business and to reduce its level of debt and leverage ratio. This sale contributes to both: it materially increases the Group's proportion of branded sales and materially reduces the Group's debt as well as contributing to reducing the leverage ratio.  

Chief Executive Officer's comments

Robert Schofield, Chief Executive Officer, Premier Foods, said:

"We are pleased to have reached an agreement to sell our canned grocery operations. As a predominantly non-branded business, it has not been an area of focus for us. Selling the Business simplifies our operations and allows us to concentrate our efforts on our current portfolio of great British brands. Combined with the proposed disposal of our Meat-free business, we will have delivered total gross proceeds of £387m, significantly accelerating the delivery of our financial strategy."

Ken Critchley, Managing Director, Princes said:

"This proposed acquisition is an excellent strategic fit for our group and will enable us to further grow our business in the UK and continental Europe by offering our customers a broader range of ambient food products and brands."

Use of proceeds and financial effects of the disposal on Premier Foods

The consideration of £182m is payable in cash on completion, subject to a stock adjustment. The initial purchase consideration will be reduced by £4.6m in respect of debtors and creditors which are being retained by Premier Foods. After estimated transaction and related costs such as dilapidations of £8m, the remainder of the net cash proceeds of the disposal will be applied to pay down the Group's existing term facility.

The disposal will have a positive impact on Premier Foods' average debt to EBITDA ratio. With net proceeds of £174m, the average debt to EBITDA ratio is anticipated to be reduced by approximately 0.2x versus what it would otherwise have been. The transaction represents a material reduction in debt and a further step towards reaching Premier Foods' target of reducing debt and achieving a 3.25 average debt / EBITDA. As at 26 June 2010, net debt was £1,365m and average debt / EBITDA stood at 4.54x.

The Group does not expect the disposal to result in any material profit on sale. It will be marginally dilutive to earnings per share.

Information on the canned grocery operations

The Business being sold is part of the Group's Grocery division and has two manufacturing sites in the United Kingdom at Long Sutton, in Lincolnshire, and Wisbech, in Cambridgeshire. In addition, two of the Group's warehouse operations in Wisbech will transfer after a period of transitional services and the parties will then enter into a long-term logistics arrangement. The Business employs approximately 1,600 people and manufactures a wide range of canned foods including baked beans, pasta, vegetables, soup, meat and fruit. Included in the sale are the Crosse & Blackwell, Farrows, Fray Bentos and Smedley's brands and certain other minor brands which are used on canned products. Premier Foods has agreed a long-term licence with Princes to enable their use of the Branston brand on baked beans and pasta in cans and the Batchelors brand on vegetables, wet soups and pasta in cans, and a short-term licence to use Hartley's on canned fruit. The Business excludes Premier Foods' Ambrosia branded canned desserts operations in Lifton, Devon, which are being retained.

The Business is currently integrated into Premier Foods' Grocery operations. Transitional services will be provided by Premier Foods to Princes while the separation of the Business from the Grocery operations is effected.

For the year ended 31 December 2010, the disposed Business is expected to have revenues of £334.2m, EBITDA of £31.7m and a trading profit of £27.8m.

As at 31 December 2010, the gross and net assets being sold were £167.1m.

Lender and shareholder approval

The disposal is conditional on lenders giving all of the consents required under the finance facilities of the Group and the approval of Premier Foods' shareholders. It is also conditional on merger control clearance by the European Commission.

A circular giving details of the disposal, and containing a notice of a general meeting at which a resolution to approve the disposal will be proposed, will be sent to shareholders shortly.

Subject to consents and the passing of the resolution at a General Meeting, the disposal is expected to complete in late March 2011.

Enquiries

For further information, please contact:

Premier Foods plc

01727 815 850

Jim Smart (Chief Financial Officer)

Gwyn Tyley (Director of Investor Relations and M&A)

Stamford Partners LLP

020 7907 9400

Raymond Duignan

Notes to editors

1 This document contains forward-looking statements which are based on the Premier Foods' Board's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables which could cause actual results or trends to differ materially, including, but not limited to, factors that are beyond the Company's ability to control or estimate precisely, such as delays in obtaining, or adverse conditions contained in, regulatory approvals, competition and industry restructuring, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in historical weather patterns, changes in competitive circumstances, changes in customer or supplier behaviour, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, the availability of new acquisition opportunities or the key timing and success of future acquisition opportunities. Each forward-looking statement speaks only as of the date of the particular statement. Except to the extent required by applicable law, the Listing Rules and the Disclosure Rules, the Company will not necessarily update any forward-looking statement in the light of new information or future events and undertakes no duty to do so.

2 Stamford Partners LLP, which is authorised and regulated in the UK by the FSA, is acting as financial adviser to Premier Foods in connection with the disposal of the canned grocery operations and no one else and will not be responsible to anyone other than Premier Foods for providing the protections afforded to clients of Stamford Partners LLP nor for providing advice in relation to the disposal of the canned grocery operations or any other matter referred to in this announcement.

3 Rothschild, which is authorised and regulated in the UK by the FSA, is acting as sole sponsor to Premier Foods in connection with the disposal of the canned grocery operations and no one else and will not be responsible to anyone other than Premier Foods for providing the protections afforded to clients of Rothschild nor for providing advice in relation to the disposal of the canned grocery operations or any other matter referred to in this announcement.

¹ EBITDA is profit before interest, tax, depreciation, amortisation, allocated Group and corporate costs and Divisional administration costs not transferred to the purchaser.