Acquisition of Marlow Foods

Premier Foods plc
06 June 2005





6 June 2005



             Acquisition of Marlow Foods Holdings Limited for £172m

    Category leading 'Quorn' brand enhances Premier Foods' branded portfolio


Premier Foods plc ('Premier') announces that it has agreed to acquire Marlow
Foods Holdings Ltd ('Marlow Foods') the owner of Quorn, the UK's leading meat
alternative brand, from Montagu Private Equity ('MPE') for £172m1. The
consideration will be satisfied through a cash payment and completion is
expected to take place later today.


In the year to 31 December 2004, Quorn sales were £79m (representing 100% of the
sales of Marlow Foods).  Normalised EBITDA2 for 2004 was £15.6m and profit
before tax was £4.6m.  The business had net operating assets of £48.3m and after
deducting the net debt, which is largely due to the capital structure following
its acquisition by MPE in May 2003, and other liabilities, it had net assets of
£3.0m at  31 December 2004.


Since UK national launch in 1994, Quorn has grown to become the UK's largest
meat alternative brand with retail sales of £95m.  Over the last five years,
Quorn has achieved an average annual sales growth rate of over 7%.  From its
initial launch targeting the vegetarian consumer, Quorn has successfully
increased its appeal amongst healthy eaters and those looking to reduce meat
consumption.  Marlow Foods now offers a wide choice of Quorn branded products
ranging from burgers, sausages and escalopes through to cottage pies and
lasagne.


Quorn provides Premier with a category-leading established brand with high
growth prospects to add to its already strong 'Drive' brand portfolio and
increases Premier's branded sales mix from 57%3 to 61%4. The UK accounts for 75%
of Quorn sales and approximately 21% of sales are exported to Sweden,
Switzerland, Belgium and Holland where Quorn holds category-leading positions.
In addition, Quorn is the number two meat alternative brand in the natural foods
sector in the USA.


Quorn has over a 60% share of the £155m meat alternative category in the UK and
a 15% share of the broader £640m meat free category.  With approximately 70% of
households seeking to eat more healthily, Quorn's excellent health credentials
mean it is strongly aligned to consumer trends.


Marlow Foods will continue to be run by its existing strong management team, led
by Managing Director, Nick Hughes, and will benefit from access to Premier's
sourcing and routes to market and its more developed presence in the food
service channel.  Premier also plans to increase brand investment to maximise
growth potential.  Premier will operate Marlow as a stand-alone unit, however
the acquisition is still expected to generate purchasing and administration
synergies of £4m per annum by 2008.


The deal should be earnings and margin enhancing in the first full year of
ownership and is expected to achieve a return on invested capital greater than
its weighted average cost of capital in the second year of ownership5.


Premier has refinanced all existing debt obligations within a new £780m debt
facility at an initial margin of 100 basis points over LIBOR, which compares to
125 basis points payable under the previous debt facility. Cash funds for the
acquisition of Marlow Foods will be satisfied from this new debt facility.



Robert Schofield, Chief Executive of Premier Foods, said:



'This is a fantastic acquisition for Premier Foods.  Quorn's strong brand
recognition and leading category positions immediately provide Premier with a
very strong branded position in an exciting growth market.  Quorn is ideally
placed to benefit from the increasing demand for healthy eating and the
combination with Premier should accelerate its growth.



'Quorn fulfils all our acquisition criteria. It enhances our branded mix, it is
UK focussed and meets all our financial hurdles.  As well as being by far the
largest brand in its category, it will be the largest brand in our portfolio'.





Premier Foods will be hosting a presentation to analysts at 10am on 6 June 2005
at ABN AMRO's offices, 250 Bishopsgate, London EC2M 4AA.



The presentation will also be available via conference call on 020 8322 3319,
passnumber 535107, with a telephone replay facility on 020 7081 9440, account
number 535107, pass number 954656, for 7 days.  The presentation slides will be
available at http://www.premierfoods.co.uk/about/investor/financial/
financial-home.cfm at 10am on 6 June 2005.



Please note that the Q&A session of the presentation will not be available on
the conference call.





1.      The purchase price is £172m less acquired debt and is subject to a
target working capital adjustment.  The acquired debt will be repaid
immediately.

2.      Normalised EBITDA represents earnings before interest, tax,
depreciation, amortisation and exceptional items adjusted for charges that will
not occur following the acquisition.

3.      2004 pro forma for the acquisition of the Bird's desserts business.

4.      2004 pro forma for the acquisition of the Bird's desserts business and
Marlow Foods.

5.      The statement that the impact of the deal should be earnings and margin
enhancing in the first full year of ownership and is expected to achieve a
return on invested capital greater than its weighted average cost of capital in
the second year of ownership does not constitute a profit forecast and should
not be interpreted to mean that earnings per share in the financial year
commencing 1 January 2005, or in any subsequent period, will necessarily match
or be greater than those for the relevant preceding financial period.




For further information, please contact:



Premier Foods plc                           Tel: [phone]
Robert Schofield, Chief Executive
Paul Thomas, Finance Director
Robert Lawson, Director of Mergers & Acquisitions and Investor Relations
Gwyn Tyley, Investor Relations Manager



Citigate Dewe Rogerson               Tel: [phone]
Michael Berkeley,
Sara Batchelor,
Anthony Kennaway





Notes to Editors



1.  Marlow Foods, owned by Montagu Private Equity, is Europe's largest company
dedicated to producing and marketing branded meat alternative products.  Marlow
Foods was founded in 1985 when it first started test marketing the Quorn brand
in the UK.  Quorn was launched nationally in 1994.



Quorn was the winner of the 2004 Vegetarian Society Awards Category for Best
Meat or Fish Substitute.



2.  Quorn is made from mycoprotein which is a member of the fungi family, as are
mushrooms, truffles and morels.  It acts as a direct meat substitute.  Quorn is
low fat, high in fibre and a good source of protein.  These characteristics mean
it appeals to the health-conscious consumer, not just vegetarians or those
wanting to reduce their intake of meat.

In the UK it has 90% brand recognition among consumers and is purchased by more
than 17% of households.  Health rather than vegetarianism is the main growth
driver with an estimated 70% of households concerned about eating more
healthily.  This compares to the UK vegetarian population which represents
approximately 5% of households.

3.  Quorn operates in a number of distinct segments in both the chilled and
frozen markets, their contribution to UK 2004 sales is shown below:



  • Meal centres (burgers, sausages, fillets, escalopes)              37%
  • Ingredients (mince and pieces)                                    35%
  • Ready meals (cottage pie, roasts),                                 5%
  • Deli (sliced meat alternatives)                                   18%
  • Food service                                                       5%



4.  Marlow Foods manufactures Quorn products at two sites in the UK, Stokesley
in North Yorkshire and Belasis in Teeside.  The company employs 360 people.




5.  Pro forma profitability



The historic results of the business have been adjusted to reflect the current
cost base of the business and also to strip out the impact of non-recurring
items.  These adjusting items have been reviewed and agreed reasonable by
reporting accountants.  Such adjusting items include:



•           Write-back of historic royalty payments as the royalty period ended
in January 2005.

•           Write back of monitoring and facility fees charged under previous
ownership.

•           A number of one off items, which both increased and reduced historic
reported results.


                      This information is provided by RNS
            The company news service from the London Stock Exchange