Prepared Foods October 17, 2005 e-newsletter

Premier Foods PLC agreed to sell its Typhoo and other tea brands to Indian conglomerate Apeejay Surrendra Group for 80 million pounds ($141 million). The British food maker said it will use the proceeds to pay down debt.

“It (Typhoo) is a great traditional British brand, but it is number three in the market,'”chief executive Robert Schofield told AFX News in a telephone interview. '”We thought we weren't the best people to take it forward for the next few years.” Premier had revealed it was in talks to sell the unit -- which also owns the London Fruit & Herb and Lift brands -- at the end of last month.

Though one recent newspaper report claimed the business, which also has contracts to supply supermarkets with own-label tea, was expected to fetch 100 million pounds ($177 million), Schofield said he was “very happy” with the price received. Typhoo has around a 10% share of the British tea market, lagging well behind Unilever PLC's PG Tips and Tata Tea Ltd's Tetley, both of which command 20% market shares.

Unlike its two bigger rivals, Premier does not have any tea plantations, which Schofield says puts it at a disadvantage. With British tea sales declining by around 1% a year, he wants to focus on the rest of the company's stable of quintessentially British foods. Schofield has recently been ploughing money into developing lines such as a new range of Branston pickles, Ambrosia custard snack pots, and Hartley's fruit smoothies.

Apeejay is among the largest producers in India with a workforce of over 40,000 and 17 estates producing over 21 million kilograms of tea. “It's an iconic brand. It's known by everybody and gives us an opportunity to grow in the U.K. market and beyond,” chairman Karan Paul said. He intends to beef up marketing expenditure in the U.K. in the coming months in an effort to grow market share. Thereafter, he says he will look to grow international sales, which presently account for around 5% of the total.

Paul is hoping that as a vertically integrated company he will be able to strip out a sizeable chunk of the company's running costs, but he denied any of the unit's 249 jobs were at risk.

Premier said the book value of the assets being sold was 25.7 million pounds ($45.4 million) as of July 2. The business had net sales of 70.2 million pounds ($124 million) and operating profit of 11.2 million pounds ($19.8 million) in 2004.

Source: AFX News