Premier Foods (LSE:PFD)’ shares ticked up 1.7% after announcing the £48 million acquisition of Merchant Gourmet, a brand best known for premium pulses, grains and ready-to-eat pouches.
Shore Capital described the deal as “very complementary” to the group’s portfolio.
The company, which owns Mr Kipling and Bisto, has been building momentum through a string of bolt-on acquisitions, including The Spice Tailor in 2022 and Fuel10K earlier this year. Each has broadened its reach into new, faster-growing niches.
Merchant Gourmet adds a foothold in plant-based and minimally processed foods, categories enjoying structural demand growth as consumers focus on health and sustainability.
The purchase price values Merchant at a single-digit multiple of earnings before interest, tax, depreciation and amortisation, which ShoreCap views as attractive given the brand’s positioning and growth prospects.
The broker expects the acquisition to be earnings accretive by the year to March 2027.
Importantly, Premier can fund the deal without strain. Net debt is only 1.3 times EBITDA, leaving the balance sheet strong and providing capacity for further transactions.
Management’s record of integrating acquisitions and leveraging its distribution scale is another positive, with Merchant Gourmet likely to benefit from greater exposure in UK supermarkets.
ShoreCap reiterated its positive stance, arguing that Premier’s shares remain undervalued relative to the broader food sector.
The latest deal underlines management’s ability to add growth at sensible valuations while staying disciplined on capital allocation.
The stock rose 3.2p to 190p.