Premier Foods expands breakfast offering with Fuel10K purchase

Premier Foods has expanded its breakfast range with the acquisition of UK brand Fuel10K for an enterprise value of £34m ($41.2m).

Fuel10K was developed by UK distributor Fresh Marketing, with a range of cereal, snack bars and milk drinks supplied under the brand to major UK retailers.

The deal for Fuel10K is the second acquisition made by Premier Foods in just over a year.

Publicly-listed Premier Foods returned to the acquisition market in July last year with meal-kit business The Spice Tailor, its first fully-fledged M&A deal in more than a decade.

The Mr Kipling cakes and Sharwood’s sauces manufacturer said the purchase of Fuel10K “substantially increases the group’s position in the breakfast category”, adding to its Ambrosia brand range of porridge pots.

Premier Foods’ CEO Alex Whitehouse said in a statement: “The acquisition of Fuel10K follows on from our successful integration of The Spice Tailor, where we have increased revenue and profit through the application of our branded growth model.

“Fuel10K provides us with an ideal platform to accelerate our expansion into the breakfast category, building on our recent successful launch of Ambrosia porridge pots.”

Premier Foods closed the deal on 29 October, noting Fuel10K has a “track record of strong double-digit revenue growth over the last three years”.

The enterprise value of the transaction equates to an EV/sales multiple of around 1.6 times based on a projected revenue for Fuel10K of circa £21m in the year to 31 March 2024.

Whitehouse added: “Possessing a differentiated category position, with its protein-enriched product range and appealing to a younger demographic, we expect to deliver significant further profitable growth of Fuel10K through the deployment of our successful branded growth model.”

Fuel10K’s products are supplied to Tesco, Sainsbury’s and Asda, and online at Ocado and Amazon.

Barney Mauleverer is the co-founder of London-based Fresh Marketing, set up in 2006 with Alex Matheson.

The deal for Fuel10K, which only supplies the UK market, comes with three production facilities – one in the UK for oat bars and two in Germany for granola and drinks – a spokesperson for Premier Foods confirmed.

Mauleverer said in a statement: “We are very excited to be passing the reins on to the owner of such a great stable of UK brands. Having built the foundations from start-up, the Fuel10K brand is now primed to accelerate into the future and achieve even more great things.”

Clive Black, a director at UK investment company Shore Capital, which has Premier Foods as a house stock, said the Fuek10K deal is “a move further demonstrating its broader brush strategy of organic and inorganic growth post The Spice Tailor”.

He added that the transaction, from Premier Foods’ perspective, “enhances its health assortment and further adds to the growth hopper of this accomplished British proprietary brand group, where its equity trades on a lowly FY-24 PER of 9.2x.

“We welcome the deal, demonstrating the material mis-rating of a fine firm.”

Premier Foods’ shares were up more than 2% at 116 pence as of 11:35am GMT in London today (30 October). The company reports half-year results on 16 November.

For the 12 months to 1 April 2023, Premier Foods’ revenue exceeded £1bn for the first time, rising 11% to just above that figure from the previous year, while trading profit increased 11.5% to £157.5m.

Adjusted EBITDA was up 13.7% at £182.3m with profit before tax rising 9.6% to £112.4m.

Premier Foods had net debt of £274.3m for the financial year, with a net debt-to-adjusted-EBITDA ratio of 1.5 times, climbing from 1.7 times previously. Post-acquisition, that ratio is expected to be lower, Premier Foods said today.