Premier buys Campbell's Irish business

LONDON: Premier Foods expects its group margins to improve by 2-3 percentage points from a deal to buy the UK and Irish businesses of Campbell Soup, its finance director said today.

"We expect the group's EBITDA (earnings before interest, tax, depreciation and amortisation) margin to improve to around 17 to 18 percent from 15 percent," Paul Thomas, Premier Foods Finance Director, said.

Chief Executive, Robert Schofield, also said that it was not planning any job cuts after the deal with Campbell.

Premier Foods, which will acquire well-known UK brands such as Oxo stock cubes and Homepride cooking sauces through the deal, said the acquisition will be funded through a rights issue at a minimum subscription price of 160p raising approximately 450 mln stg.

According to the company,the deal would take its branded sales mix to 69 pct and sees projected cost synergies of 28 mln stg within three years.

Robert Schofield, the chief executive, said: "The Campbell's UK business fits Premier like a glove. This acquisition will bring an excellent portfolio of powerful and iconic brands which we intend to drive forward with increased resource and innovation.

"Moreover, we are putting in place a financing structure which will give us the flexibility to continue to pursue our acquisition strategy."

Shares in Premier closed last night at 309.5p ahead of confirmation of the planned equity fundraising and valuing the group at £ 773.26 million.

For the 12 months to the end of July last year, Campbell's posted pre-tax profits of £ 54 million on sales of £ 263 million. Some 98 per cent of Campbell's sales are to the UK and Ireland.

Since 2002, in the UK Premier has bought the "ambient" foods business of Nestle, Unilever's desserts operations, Kraft Foods' puddings unit, Quorn and Cauldron.

These acquisitions have given it brands including Sarsons vinegar, Sun-Pat peanut butter and Bird's custard.