Still no official update..

Freedom Foods looks to hive off muesli, seafood units

Carrie LaFrenzSenior reporter

Nov 30, 2020 – 1.18pm

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Freedom Foods Group is believed to be seeking to offload its non-core cereals/snacks and canned seafood businesses as part of its revamp plans.

The troubled company, which last traded on the ASX nearly five months ago, plans to sell off assets in order to focus on its key dairy/nutritionals segment and plant-based businesses, which make up about 50 per cent and 44 per cent of group earnings respectively.

Tony Perich and family have a controlling equity stake in Freedom Foods. Jacky Ghossein

While Moelis Australia is the leading adviser in the recapitalisation of the company, it is also hiving off assets of the food and snacks manufacturer that is due to present its combed-over accounts for fiscal 2020, as well as the past several years, later today.

Investors are bracing for major write-downs, as well as news around the future of chairman Perry Gunner and non-executive director Trevor Allen.

An information memorandum on the muesli business – which is estimated to turn around $100 million in annual sales – has been sent to a few selected possible buyers, including food giant Arnott's, but has not gained much traction.

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One main issue it outlined in its half-year accounts, and pointed out by one source, was the capacity under-utilisation.

"It had trouble filling capacity because competitors do not want their bars to be made by someone who has their own brand," said the source.

Freedom Foods is seeking to hive off its muesli and bars business as part of its renewed focus on the dairy/nutritionals business.

The muesli market is very competitive, with Carmen's the leader in the segment.

Freedom Foods has its Arnold’s Farm brand sold in Woolworths, and also Heritage Mill and Brekky Heroes brands sold in Coles.

Freedom made a strategic decision during the first half of 2019 to exit a large number of major contract manufacturing deals for private label customers in cereals and milling in order to focus on its own brands.

Cereals and snacks segment made up about 4.9 per cent of earnings in the first half of 2020, while the specialty seafood operations were 0.2 per cent.

Freedom Foods bought the Canadian Brunswick Sardines business in 2005, while Paramount Seafoods was acquired in 2003. Paramount has as a strategic partner Bumble Bee Seafoods, which is North America's largest canned seafood company.

According to the 2019 annual report, Brunswick maintained its No. 1 brand position in Australia and New Zealand, and it has a growing Paramount Salmon brand. Specialty Seafood sales fell 9 per cent to $7.1 million in the first half of 2020.

A source estimated the seafood operations could carry a price tag of between $10 million to $20 million remain halted for several more weeks while it tries to finalise a convertible notes deal with US firm, Oaktree Capital Management.

The company is estimated to be seeking a $200 million capital injection after it suddenly revealed in late June it would have to write off $60 million worth of old cereal and UHT milk as well as accounting irregularities, which sent the company into a trading suspension.

The shares last traded at $3.01. The Perich family owns a majority 52.5 per cent stake in Freedom Foods.