GrandMet disposal cooks up charge of pounds 39m

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The Independent Online
Grand Metropolitan is selling its Aunt Nellie's Farm Kitchens division to Seneca Foods for around pounds 15m, but the disposal will result in a pounds 39m exceptional charge.

Despite the hit from the disposal, GrandMet's shares gained 8.5p to a five-year high of 508.5p, as analysts continued to favour the change in strategy under George Bull, Grand Met's chairman, and John McGrath, chief executive.

Aunt Nellie's, based in Wisconsin, US, is a glass-jar fruit and vegetable business operating three plants. GrandMet said pounds 28m of the pounds 39m write- off related to goodwill previously written off. "The pounds 39m will be taken in the half-year results to be announced on 15 May," Grand Met said.

Part of its Pillsbury Company unit, Aunt Nellie's employed 280 people and its 1996 sales were around $50m (pounds 31m) and the business had broken even.

Paul Walsh, Pillsbury's chief executive, said the sale would improve its return on capital as it was part of the group's strategy to exit low- return businesses.

Analysts said it was just one part of a series of recent positive announcements from GrandMet. "The market likes the continuing good news on the spirits front," said Geof Collyer of NatWest Markets. "For the last five years all we have seen is downgrades in the spirits market, but that seems to have come to an end. A lot of people are expecting GrandMet's results in a few weeks' time to justify [that impression]."

Another analyst, who declined to be named, said: "Sentiment has been relatively positive and it is really just follow-through from that."

Shares in the Smirnov vodka to Burger King group rose at one point to 509.5p - their highest since June 1992. At yesterday's high the stock was some 19 per cent above its lowest close of the year of 429p set on 15 January.

Last week Merrill Lynch repeated a "buy" recommendation on the stock, noting a longer-term chart objective of 650p, while other brokers have recently said that they favoured GrandMet over Allied Domecq.

In the 1990s the spirits division has reported growth of profits, volumes and investment in advertising faster than the competition. This is likely to enable GrandMet to outperform rivals over the next three years, analysts say.

Burger King, Pillsbury baked foods and IDV are outperforming their rivals, which has prompted a clutch of "buy" notes in past weeks.