Disposal programme
As part of its Shaping the Future business review announced on May 31 2006, Northern Foods indicated that it proposed disposing of businesses representing approximately 40 per cent of group revenue in order to focus on fewer, higher performing categories.
The disposals, which were completed on 13 January 2007, will support reduced complexity in the business, improve focus and thus drive improved performance, earnings and cash flow, creating a more competitive, resilient business.
In total, gross proceds of £211.2 million were received from the disposal programme and the overall process was completed in under eight months, ahead of the full calendar year target.
Businesses for disposal
The businesses in the disposal programme comprised:
- Smiths Flour Milling and NFT Distribution, which were non-core businesses
- Cakes and Speciality Bread, which Northern Foods anticipated would continue to trade with lower margins, relative to their chosen categories
- Chilled Pastry Products, which had significant upside potential but required major investment.
Proceeds of the sales, which exceeded a target of £200 million, are being used to reduce borrowing, fund pension liabilities and invest in growing the business.
Sales details
In August 2006 Northern Foods completed its first successful sale in the disposal programme, when the business and assets of NFT were sold for £51.2 million to a new group formed by a management buyout and backed by Phoenix Equity Partners.
In January 2007, Northern Foods announced that it had completed the sale of its Speciality Bread, Chilled Pastry, Cakes and Flour milling businesses in one deal, valued at £160 million gross, to Vision Capital Limited.
