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Premier Foods and Oasis Management's war of words continues ahead of CEO vote

Oasis is calling for one of Premier's gems - Batchelors - to be sold off but, perhaps unusually for a hedge fund, it is not seeking for any of the proceeds to be directly returned to shareholders but instead to be used to derisk the company and improve its business
A cup of soup
Gavin Darby has found himself in hot water

The battle lines are being drawn up ahead of the vote on the future of the Premier Foods PLC (LON:PFD) chief executive later this month.

Premier's boss, Gavin Darby, could find himself in the soup if the vote on July 18 goes against him, but the company noted this morning that the voting advisory services, Glass Lewis and Pensions & Investments Research Consultants, have urged Premier shareholders to vote in favour of Darby's re-election.

READ Premier Foods up as major shareholder renews calls for CEO to step down

Hong Kong-based Oasis Management is agitating for Darby's removal after what it called “years of persistent shareholder value destruction, poor financial performance, consistent[ly] missed targets, a lack of strategy and weak corporate governance”.

The hedge fund called on Premier to hold an open auction to offload its Batchelors Soup brand, best known for its “Cup a Soup” product, to extract a bit of value for the company's shareholders.

“Using conservative assumptions, Oasis believes that the sale of Batchelors ... would generate more than £200mln of proceeds, or more than 60% of the current market capitalisation of the company,” Oasis said on a web site set up specifically to garner support for its campaign to oust Darby.

According to Oasis, selling Batchelors – Premier's fast-growing brand – would reduce the indebted company's gearing below 3.0 times annual underlying earnings, reduce interest costs by more than 65% and strengthen its pension schemes.

Oasis has a 9.3% stake in Premier Foods, which numbers Mr Kipling and Oxo among its brands.

The heavily-indebted foods group is in "a zombie state"​

It reckons a sale would result in a share price increase of around 55% for Premier and would enable Premier Foods to exit its current “zombie state” to invest and grow again.

“Potential bidders are known to include Nissin, as well as other strategic buyers/financials sponsors,” Oasis claimed.

It recently suggested that Japanese noodle maker Nissin, which has a 19.65% stake in Premier, should abstain from the forthcoming vote as it has a conflict of interest as a putative buyer of the Batchelors brand.

“It’s time for Gavin to go and we call on Nissin to recognise this. We do not want other Premier Foods shareholders’ best interests to be blocked by Nissin, a conflicted shareholder,” a spokesman for Nissin said.

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