US investors buy up a large slice of Hovis

Hovis owner Premier Foods has signed over a 51 per cent stake in Hovis to the Gores Group in a deal that values the baker at £87.5 million.

It will continue to run under the Hovis name and the deal will see £28 million pumped into Premier's grocery business, which includes Bisto and Mr Kipling.

Between then, Gores and Premier Foods say they intend to invest £45m in Hovis to enable a £200m five-year investment programme for the bread business.

Hovis has been struggling in a highly competitive market and last year it pulled out of a low profit deal supplying Co-op supermarkets that cost it £75m in annual sales and led to the closure of bakeries, including one in Birmingham, and the axing of around 900 jobs.

Today Premier said the deal with Gores would see Hovis run as a stand-alone joint venture, with an aim to 'reinvigorate' the Hovis brand.

The Hovis business achieved sales of £654.6m last year and earnings of £21.9 million.

Premier Foods chief executive Gavin Darby said: "I'm delighted that we've found a strong partner in The Gores Group who will help provide the investment necessary to develop the bread business. This will be good for our customers, our employees and all those connected with the business."

Gores' managing director Fernando Goni added: "We are excited to partner with Premier Foods to revive the Hovis brand and spearhead re-investment across the bread business.

"We believe there is significant untapped potential in such a well-loved, household name and are confident in the abilities of the talented management team to drive value for all stakeholders. The Gores Group has a rich history of working alongside corporate partners to unlock latent value in divisions that require operational and commercial improvement and, as such, we are convinced that Hovis offers a perfect fit for our unique capabilities."

The joint venture business will be led by Bob Spooner, currently managing director for bread and group supply chain director at Premier Foods.