Premier Foods – it all comes down to strategy

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Premier have now responded to the Oasis “decapitation” initiative with a posting on their website outlining the case for retention of the present CEO. Its worth a read through and you can find a copy here –

Premier have taken each of the key areas mentioned by Oasis and outlined their own position on the matter. The pack summarises the past financial performance, the abandoned McCormick approach, the strategic review and Gavin Darby’s pay. And, to demonstrate that they DO have a strategy they outline its four elements – cost reduction and efficiency programme, leveraging strategic partnerships, increasing innovation and growing international revenues. The pension fund trustees have also waded into the debate and get a prominent mention expressing concerns about continued funding if there is a move to reduce the scale of the business.

Oasis themselves have also issued more statements which can be seen here –

They have responded to the concerns of the pension trustees, they have further highlighted the conflict of interest concerns they have about Premier’s largest shareholder Nissin Foods, and, for good measure, they have taken a side swipe at Keith Hamill the chairman for “denigrating the company’s brands”. Furthermore, they have been clearer about their view on strategy and have produced an interesting position paper proposing the sale of the Batchelor brand to accelerate the reduction of the debt mountain and thus strengthen the balance sheet as quickly as possible.

The fundamental question to be answered is what would be the best strategy for Premier in the medium to long term and who would be best to implement it. We now have more clarity from the Premier board on this matter and also from Oasis. It seems to me to come down to a matter of speed of execution. Oasis are keen to re-structure Premier’s finances to enable more immediate and, possibly, more rapid growth but, to do so, the brand portfolio and revenues will need to shrink before they can grow and its not clear who will be at the helm to lead the execution. And remember that Oasis only own 9.4% so what they say doesn’t necessarily go. On the other hand, the present board favour a more measured approach with no asset sales but, by doing so, they may be denying themselves faster access to growth opportunities and may miss the boat as the food sector goes through rapid change.

No easy answers here…

Mike Dennis – ShareSoc Director

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