Private equity firm Warburg Pincus will pay £64 million for a 10.3 percent stake in publicly traded UK food conglomerate Premier Foods. It will acquire nearly 246 million of the 1.5 billion shares which are being offered.
Premier hopes to raise approximately £404 million in proceeds from the sale of its shares. It has been struggling under a reported £1.7 billion debt mound having used leverage to takeover Campbells Soup for £450 million and RHM for £1.2 billion in 2006.
As well as committing to acquire a 10 percent stake Warburg Pincus has also committed to subscribe to up to 250 million of additional shares, subject to clawback by existing shareholders if they do not fully take up their entitlements to the remaining shares on offer. All investors are investing in ordinary shares at a price of 26 pence per share. The price represents a discount of 9 percent to the share’s closing price of 28.5 pence each yesterday, and this morning Premier’s shares were trading up 6.25 pence at 34.75 pence 9:25am GMT.
The fundraising will form the basis for a capital restructuring for Premier, which includes an extension on its lending agreements and a new pensions framework agreement.
“We believe that this is a resilient business with strong management and excellent brands. The proposed new capital structure provides the business with a robust platform for growth,” Steve Coates, a Warburg managing director, said in a statement.
Premier’s annual results, which were released this morning, reported tr
The proposed new capital structure provides the business with a robust platform for growth.
ading profits before tax for 2008 of £310 million, up 30 percent from £272 million in 2007. Robert Schofield, chief executive of Premier, said it was pleasing to see how strong the firm’s trading has been during such a tough period for consumer-facing businesses.
Speculation regarding Premier’s restructuring has been rife over the last few months. In December the UK media reported that Premier Foods had asked Goldman Sachs to approach The Blackstone Group, Bain Capital, Permira and Lion Capital to negotiate a cash injection of between £200 million and £700 million.
Premier first received private equity backing in 1999 when it was acquired by Hicks, Muse, Tate and Furst, but it was floated on the London Stock Exchange in 2004.
Warburg has invested more than $3 billion in consumer companies since its inception, the firm said. Founded in 1966, the global reaching firm has raised 12 private equity funds which have invested in more than $29 billion worldwide.