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Can a US equity giant revive Hovis?

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By Kacey Culliney+

13-Jan-2014
Last updated on 13-Jan-2014 at 13:21 GMT

The revival of Hovis needs to happen within a broader balancing of the UK packaged bread market, says analyst
The revival of Hovis needs to happen within a broader balancing of the UK packaged bread market, says analyst

US Gores Group is allegedly in talks to buy out a stake of Premier Foods’ Hovis business and a city analyst has said that geography would not impact its ability to turn around the struggling brand.

The Los Angeles-based private equity group – headed up by billionaire Alec Gores – is in talks to buy a ‘big stake’ in the Hovis brand following a competitive auction, according to the Sunday Times.

In November last year, Premier Foods said it had appointed mergers and acquisitions specialist Ondra Partners to assist in developing investment options for the Hovis brand, which included co-investment opportunities.

Clive Black, director and head of research at UK-based Shore Capital, said that investment would be positive for the Hovis business.

“[It] needs new capital, new approaches,”  Black told BakeryandSnacks.com.

“Quite a lot of rationalization – plant closures and consolidation – has already taken place, but a lot of its bakeries will need to be modernized,” he added.

Hovis’ production network lags behind its competitors like Allied Bakeries, he said.

Can this turnaround be sparked from overseas?

Asked if a US firm had the ability to inject life into the UK brand, Black said that “geography isn’t an overriding concern”.

“I’m not sure that the origin of the investor is so important. I wouldn’t assume they’re ill-informed or detached just because they’re based in California,” he said.

Black said a turnaround of Hovis would need to fit into a broader push in the UK packaged bread sector to develop a more balanced industry – where supply no longer outweighs demand.

“There’s over-capacity in the UK packaged bread sector and one player cannot change this, it does require participation of others,” he said.

Last year Premier Foods spent £28m on restructuring , which included closing three bakeries and two mills. It also lost its contract with the Co-operative to rival UK bread firm Allied Bakeries at the end of 2012.

1 comment (Comments are now closed)

Loss of Co-op

Hovis exited the co-op contract because the offer price and margin was far too low, hence the subsequent required reduction in the production and distribution network.

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Posted by kegs
14 January 2014 | 15h45

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