Northern Foods has reached agreement for the proposed sale of the business and assets of its chilled distribution business for £51.2 million.
The buyer is a new group formed through a management buyout and backed by Phoenix Equity Partners.
The proceeds of sale of NFT Distribution will comprise £44.5 million in cash, due on completion of the transaction, together with a loan note of £6.7 million, payable within twelve months of the acquisition. These will also be subject to a final adjustment for the closing working capital on completion.
The majority of the proceeds will be used to reduce debt, with a payment of £10 million to be made to the Northern Foods Pension Scheme.
The new company will assume the name of NFT Distribution Holdings Ltd, and completion is expected to take place in approximately fourteen days following employee consultation and issue of new transport operating licences.
Established in 1979, NFT was established by Northern Foods to provide chilled distribution services to the food sector. NFT provides primary distribution with a network of eight sites across the UK comprising dedicated and shared facilities, as well as secondary distribution and warehousing.
NFT’s turnover for the year ended April 1, 2006 was £111.4 million, with an operating profit of £3.9 million. Approximately 89% of the business is with third party customers.
The disposal of NFT is the first sale under Northern Foods’ wider disposal program announced in May this year. As part of a radical refocusing of the company, Northern Foods is progressing the disposal of businesses currently representing approximately 40% of group revenue in order to concentrate on fewer, core categories. Proceeds of the disposals will be used to reduce borrowings and the pension deficit as well as to invest for growth.
