2006 press releases

Northern Foods plc (‘Northern Foods’ or ‘the Company’) today announces that it has reached agreement with Vision Capital funds (‘Vision Capital’) for the proposed disposal of its Speciality Bread, Chilled Pastry, Cakes and Flour milling businesses for a gross consideration of £160 million. The transaction is expected to complete in January 2007 and is subject to approval by the shareholders of Northern Foods.

Together with the disposal of the business and assets of NFT Distribution in August 2006, total gross disposal proceeds of £211.2 million will have been raised. After fees and expenses, total net proceeds of the overall disposal programme will have exceeded £200 million.

The proposed sale covers (i) the entire issued share capital of Fletchers Bakeries Limited (‘FBL’), and the business and assets of: (ii) Chilled Pastry (‘CP’); (iii) Park Cake Bakeries (‘PC’); and (iv) Smiths Flour Mills (‘SFM’); (all collectively known as ‘the Assets’). The existing management teams and employees will transfer to the purchaser with the Assets on completion of the disposal (‘Completion’).

For the 52 weeks ended 1 April 2006, the Assets generated sales of £477.0 million, with profit from operations before exceptional items of £7.9 million and a loss after exceptional items of £37.6 million. For the 26 weeks ended 30 September 2006, the Assets generated sales of £217.3 million and a profit from operations before exceptional items of £0.3 million. The Assets’ gross asset value was £272.3 million as at 1 April 2006 and £288.0 million as at 30 September 2006.

The proposed disposal of the Assets is in line with Northern Foods’ business review, outlined in May 2006. It will complete the sale of businesses representing approximately 40 per cent of Northern Foods’ sales, allowing the Company to focus around five core categories where it has strong leading brands, or high growth, own label positions: Pizza, Biscuits, Ready meals, Sandwiches & salads and Puddings.

Following Completion, Northern Foods proposes to pay part of the proceeds into its principal UK pension scheme in an amount broadly equivalent to the share of the deficit attributable to the Assets measured on an accounting valuation basis. This will include settlement of FBL’s pension debt arising under section 75 of the Pensions Act 1995.

The remainder of the consideration received will be used to reduce borrowings and invest in growing the retained core businesses against tightly defined return criteria. The consideration will be subject to final adjustments for closing working capital and cash/debt as at Completion.

Following settlement of the insurance claim relating to the fire at FBL’s Sheffield facility in July 2006, Vision Capital will receive the benefit of £30.3 million of the claim proceeds at Completion.

Conditions of the proposed disposal

The proposed disposal is conditional upon Northern Foods receiving the approval of its shareholders at an Extraordinary General Meeting (‘EGM’), which is expected to take place in January 2007. Assuming shareholder approval is obtained, completion is expected to occur soon thereafter. A circular to Northern Foods’ shareholders, including the notice for the EGM, will be posted in December.

Chief Executive’s comments

Commenting on the proposed disposal, Pat O’Driscoll, Chief Executive of Northern Foods, said:

"This disposal, together with the sale of NFT, completes our divestment programme in line with the objectives we set out in our business review on 31 May 2006. The early conclusion of this process, as a single transaction to Vision Capital, is very positive for our staff and customers. We can now focus all our attention on our core categories to build a competitive and resilient Northern Foods.”

Julian Mash, Chief Executive of Vision Capital, commented:

"We are very pleased to have reached agreement with Northern Foods on the acquisition of this portfolio of businesses. Each has a strong management team and produces outstanding, high quality products. We look forward to working with the management teams, investing in the businesses to enhance customer relationships and supporting them in realising their potential.”

Notes
Northern Foods is one of the UK’s leading food producers with revenue of £1.4 billion in 2005/06 and around 20,200 employees, based in sites across the UK and Ireland. The Company produces a wide range of own label and powerful branded products and enjoys a strong reputation for quality and innovation. Key brands include Goodfella’s, Fox’s and Matthew Walker. For the 52 weeks ended 1 April 2006, the businesses being retained had revenue of £862.0 million and profit from operations before exceptional items of £58.2 million.

The Assets comprise:

Speciality Bread: FBL is a supplier of bakery products to both retailers and foodservice customers. The business consists of Fletchers, which consists of a head office based at Sheffield (where the main manufacturing facility is located), together with three other manufacturing sites (Whitefield, Harlesden and Barnsley).

Chilled Pastry: CP manufactures chilled savoury pastry products at six sites (Market Drayton, two sites in Nottingham, Trowbridge, Shaftesbury and Sheffield) and the disposal also includes a further site at Trafford Park, which is due to close on 24 November 2006. Products include the Pork Farms brand and a range of own label hot pies, sausage rolls, cold pies and quiche for retail customers.

Cakes: PC manufactures mainly private label ambient and chilled bakery products on two sites at Oldham and Bolton, for a number of own label customers. Products include cakes, desserts, pies and tarts.

Milling: SFM is a modern milling business run from three sites at Worksop, Langley Mill and Holbeach. The business supplies a range of wheat, maize and rice products, both to Northern Foods and to other third party customers.

Vision Capital is an independent investment firm headquartered in London. The firm focuses on acquiring predominantly European portfolios of direct private equity investments from private equity firms, corporates and other investors. These transactions enable sellers to realise value from an entire fund or portfolio in a short time frame, without having to sell their interests in the portfolio companies on an individual basis. Vision Capital brings fresh capital and a new time horizon to its investee companies and works with their management teams to develop them over the medium term. It is currently investing Vision Capital Partners VI LP, its recently raised fund, with a programme investment capacity of up to €1billion.

This announcement has been issued by, and is the sole responsibility of, Northern Foods plc.

N M Rothschild & Sons Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to the Company in connection with the proposed disposal and will not be responsible to any person other than the Company for providing the protections afforded to customers of N M Rothschild & Sons Limited, or for advising any such person on the contents of this announcement or any other transaction, arrangement or matter referred to in this announcement.

UBS is acting exclusively as broker to the Company and no-one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of UBS nor for providing advice in relation to any matter referred to herein.