Yorkshire business in Premier Foods JV agreement

YORKSHIRE’S Speciality Powders Holdings has entered into a joint venture with Premier Foods, one of Britain’s largest branded food producers.

The new joint venture, to be named Knighton Foods, will see North Yorkshire-based Specialty Powders Holdings, a provider of speciality powder processing services to the food and nutrition industry, work with Premier Foods, the owner of well-known brands including Mr Kipling and Bisto, to process and pack powdered beverages and desserts from Premier Foods’ Knighton facility in Staffordshire, with a second site in Knaresborough.

Knaresborough-based Speciality Powders is the holding company for three manufacturing companies that provide powder processing and production services to clients throughout Europe and will hold a 51% controlling stake in the venture, which will be led by Mike Kirby, majority shareholder and group managing director of Specialty Powders, who will become chairman of the joint venture upon completion.

Kirby said: “This is a fantastic opportunity for both parties. Knighton Foods will have a strong focus on dry powder products with the ability to invest in new processes, products and packaging formats. Our combined technical expertise and manufacturing capabilities will ensure that we continue to deliver high quality products for our customers and consumers, and enable us to develop a successful, broad-based powder processing and packing business for the future.”
 
Adrian Ballam and Caroline Thompson-Hayes from Yorkshire law firm Schofield Sweeney are advising Specialty Powders in connection with the joint venture. Leeds-based Sterling Corporate Finance is also advising Specialty Powders, while Premier Foods is being advised by Slaughter and May on the transaction.

Gavin Darby, chief executive officer of Premier Foods, added: “This innovative agreement will help to improve the efficiency of Premier’s Grocery infrastructure and, at the same time, allows us to benefit from a dedicated team with expertise that can support our powdered beverages and desserts business. I’m delighted that, in Specialty Powders, we’ve found a highly successful, entrepreneurial partner who is committed to growing the combined business. This is a very positive development both for Premier Foods and for our employees at Knighton.”

Specialty Powders will contribute its wholly-owned businesses, Phoenix Foods and Agglomeration Technology, to the joint venture, in consideration for a 51% controlling stake and a loan from the joint venture to repay its existing debt. The firm said it has approximately £3m of existing debt which will be repaid on completion using the proceeds from a loan from the joint venture.

The proposed transaction includes the transfer of approximately £16m of private label and business-to-business sales of powdered beverages and desserts from Premier Foods to the joint venture. In addition, the Brown & Polson brand of home-baking ingredients will be licensed to the joint venture for five years, which also includes a call option for the joint venture to purchase Brown & Polson for £2.75m. Premier Foods will retain all of its other brands currently manufactured at the Knighton site.

Completion of the transaction is conditional upon the repayment in full of Specialty Powders’ existing debt and the joint venture’s entry into new specified financing arrangements. The joint venture is expected to benefit from a credit line of up to £10m, the details of which will be finalised prior to completion.