Liverpool-headquartered Real Good Food is to sell a snack bars maker to The Hut Group in a deal worth more than £40m.
The Wavertree company is to dispose of its entire 83.3% stake in North Wales-based Brighter Foods for £43m.
RGF has said the net assets being disposed of amount to £17.3m, resulting in a profit on completion of approximately £20.4m.
A RGF statement issued to the London Stock Exchange said: "The board believes that the disposal provides the company with the opportunity to crystallise an attractive return on invested capital with respect to Brighter Foods, reduce net debt, make a material contribution towards the group's pension deficit and also to provide additional financial flexibility to support the operation and growth of the continuing group.
"Following the disposal, the continuing group will consist of the company's cake decorations businesses being Renshaw and Rainbow Dust Colours, and two vacated properties held as assets for sale."
Real Good Food executive chairman Mike Holt said: "We are very pleased with the disposal which crystallises substantial value for the group and enables us to halve our debt burden at a stroke, whilst materially improve the funding of the pension scheme.
"It also provides a basis for further balance sheet restructuring, as we look to accelerate and maximise value within Renshaw and Rainbow Dust Colours.
"Brighter Foods is a very good business and I am sure it will continue to grow and develop with the direction and support of THG. We wish Robin Williams, Brighter's founder, and his team at Brighter Foods all the best.
Most Read
"I would also like to thank Shaun Brownell and his team at Spayne Lindsay for helping to secure best value for the group on Brighter's sale."
Spayne Lindsay & Co acted as financial adviser to Real Good Food on the disposal of Brighter Foods.
Matthew Moulding, executive chairman and chief executive of The Hut Group, added: "We are delighted to announce our first major acquisition within THG Nutrition in 2021.
Don't miss a thing - sign up for your free North West newsletter - and follow us on LinkedIn
Email newsletters
BusinessLive is your home for business news from around the North West- and you can stay in touch with all the latest news from Greater Manchester, Liverpool City Region, Cheshire, Lancashire and Cumbria through our email alerts.
You can sign up to receive daily morning news bulletins from every region we cover and to weekly email bulletins covering key economic sectors from manufacturing to technology and enterprise. And we'll send out breaking news alerts for any stories we think you can't miss.
Visit our email preference centre to sign up to all the latest news from BusinessLive.
For all the latest stories, views, polls and more - and the news as it breaks - .
"Brighter highly complements our developed vertical integration strategy and strengthens our capabilities in the growing convenience and snack bar market.
"Nutritional bars are a high growth category for THG, with significant product extension opportunity across all our brands.
"The Brighter team bring a wealth of bar manufacturing and product development expertise, and in line with the Claremont and Berryman's acquisitions, enables THG to significantly accelerate the launch of further product innovation into global markets, while increasing the proportion of THG Nutrition products wholly manufactured in-house."
Don’t miss
The transaction is expected to complete on or around May 11.
Real Good Food has also confirmed that trading in both its remaining divisions improved during the second half of the year ended March 31, 2021.
Group revenue was 2.4% ahead of FY20 in Q3 while in Q4, revenue within cake decorations was marginally ahead of last year, but revenue in Brighter were lower, "mainly due to a particularly strong Q4 last year and the timing of limited edition launches".
Unaudited EBITDA for the existing group for the year ended March 31, 2021, was £2.8m, down from £5.4m.